Preserving Your Retirement Assets

Is there too much risk in your retirement plan? A new MassMutual Retirement Savings Risk Study claims that a lack of understanding about risk has led some retirees and workers within 15 years of retirement to focus more on growing, rather than preserving, their assets.

For instance, 59 percent of preretirees and 32 percent of retirees describe their primary investment strategy as focused on either “aggressive growth” or “moderate growth.” In addition, 32 percent of preretirees and 49 percent of retirees characterized their investment mix as a balance between growing and preserving their savings.

But preretirees say they plan to become substantially more conservative when they retire, with 43 percent of them saying they expect to be primarily focused on asset preservation when they retire. The problem: In the event, just 23 percent of retirees said they were focused on asset preservation at that time.

Why Did Jobs Slow Down?

After Friday’s jobs report showed weaker-than-expected job growth in March, economists have been scrambling to find an explanation. U.S. nonfarm payrolls rose by 103,000 in March, a sharp slowdown from the prior month’s gain of 326,000, the Labor Department said Friday.

Some economists pointed to March’s inclement weather, citing pullback in industries that are easily affected by snowstorms and freezing temperatures. Employment in construction rose robustly by 65,000 in February, but fell by 15,000 in March. Similarly, the retail trade industry lost more than 4,000 jobs after gaining a solid 47,000 in February.

But other analysts said the weaker number in March was bound to happen simply because of February’s strong jobs growth figure. After the unusually and unsustainably robust February gains, the March weakness may just represent an unavoidable hangover.

March Jobs Report

The U.S. economy added just a somewhat disappointing 103,000 jobs in March, the lowest number in six months, the Bureau of Labor Statistics reported this morning. The headline unemployment rate was unchanged at 4.1 percent.

The figures for the first two months of the year were also revised downward. The new numbers show employers added 326,000 jobs in February and 176,000 in January, a net downward revision of 50,000. Still, through the first three months of the year, employers have added an average of 202,000 workers to payrolls, ahead of 2017’s average monthly growth of 182,000.

Wage growth ticked upward, but was still below expectations. Average hourly earnings for all private-sector workers increased 8 cents last month to $26.82. Wages rose 2.7 percent from a year earlier in March. Wages haven’t increased at better than a 3 percent rate from a year earlier since the recession ended in 2009.

The Growing Rental Market

One thing that may be slowing the recovery of the housing market: A growing share of apartment renters aren’t interested in buying a home. They’re just too expensive.

In all, 20 percent of renters said they have no interest in owning a home, up from 17 percent in August and 13 percent in 2016, according to results of a semiannual survey of renters by mortgage company Freddie Mac. Two-thirds of renters who plan to continue renting said they are doing so for financial reasons.

The growing preference for renting comes even as the economy has strengthened and credit has loosened. Renters generally report being better off financially, with some 39 percent saying they have money to take them beyond the next payday, up from 34 percent in August, according to Freddie.

An Outlook for Brighter Days

After a rough patch for the markets, there's a reason for optimism ahead. S&P 500 firms are forecast to report profit growth of 17 percent in the first quarter of 2018 from a year earlier, according to reported results and analysts’ forecasts compiled by FactSet.

Those estimates reflect an upward revision of 5.4 percent throughout last quarter. That would be a record move higher, as analysts lifted their earnings targets due partly to the effects of a drop in the corporate tax rate.

Some sectors where share prices have lagged recently are expected to have some of the most robust profit growth. Energy companies are forecast to have 79 percent earnings growth. S&P 500 tech companies are expected to have grown profits by 22 percent, with Facebook, Apple, and Netflix  showing an even bigger rise.

Tech Troubles

It was a rough day yesterday for the broader market, but maybe the most significant declines happened on the tech-heavy Nasdaq index. The Nasdaq Composite Index was down 2.7 percent on the day, erasing all its gains for the year. It is now down 0.5 percent for 2018.

All 100 components in the Nasdaq-100 Index, which contains 100 of the largest stocks in the broader index, declined on the day. That index is also now in negative territory for the year. Amazon.com was the most notable loser of the day, dropping more than 5 percent.

The Nasdaq is nearing correction territory, defined as a drop of at least 10 percent from a peak. The Nasdaq hasn’t had a correction in more than two years, since February 2016.

Welcome, April

The U.S. stock market is coming off a rough March. The S&P 500 and Dow Jones industrial average both declined, and  it was the worst month for the Nasdaq in more than two years.

But things might be getting better. April has historically been a strong months for stocks, with the Dow Jones Industrial Average gaining an average of 1.9 percent going back to 1950. That stands as the single best month of the year for the Dow, based on average monthly performance.

It is the third-best month of the year for both the S&P 500 and the Russell 2000 index of small-cap stocks. The S&P has historically gained an average of 1.5 percent over the month, as has the Russell. For the Nasdaq, April stands as the fourth-best month, with an average gain of 1.4 percent.