Consistency Wins Out

Just about everyone's 401(k) took some kind of hit during the stock market downturn of 2008-09. Research from the Employee Benefits Research Institute shows that the average 401(k) balance dropped by 34.7 percent in 2008 alone.

Many savers compounded the error by reducing the amount of money they put into those accounts. But the study also showed the importance of staying the course, even through a sharp market decline. The average 401(k) account had $63,929 in it by the end of 2012. But among those who maintained consistent contributions to their accounts, the average balance was $107,053.

Plan holders who made regular contributions to their 401(k)s earned a 6.8 percent return between the end of 2007 and the end of 2012, despite the massive downturn in the middle of those years. That's one more lesson in the importance of not neglecting your retirement plan.

Not So Hot in August

As we embark on another August, it's worth pointing out that this is generally a pretty dismal time for stocks. Summer in general is the weakest time of the year for the market, with the worst months historically coming from June to September.

Since 1985, the S&P 500 has lost an average of 0.6 percent in August. Over that time frame, the index has declined nearly half the time in August. The only weaker month has been September, in which the S&P has dropped by an average of 0.7 percent.

The odd thing about August is that it often seems out of step with the rest of the year. In 2013, when the S&P was up by about 30 percent overall, it lost 3.1 percent in August. But in 2012, when the S&P was up just 13 percent, we had the rare good August, with the index gaining 2.0 percent.

July's Jobs Report

July was another solid month for job creation, according to figures released this morning by the Bureau of Labor Statistics. The economy added 209,000 jobs in July, marking the sixth consecutive month of 200,000-plus new jobs.

Still, the headline unemployment rate notched upward, from 6.1 percent to 6.2 percent, a result of more people entering the job market. The labor force participation rate rose slightly from June's number, increasing from 62.8 percent to 62.9 percent. It's still near historic lows, however.

That 209,000 figure matches the average number for job creation over the past 12 months, but it's down somewhat from more recent months. The BLS revised the figures for May and June in this morning's report, up to 229,000 and 298,000, respectively.

GDP Comes Back Strong

The first estimate of second quarter GDP came in stronger than most economists had predicted, at 4.0 percent growth. On top of that, first quarter growth was revised upward a bit, from a loss of 2.9 percent to a loss of 2.1 percent.

The biggest factors: Spending on total goods made its highest contribution to GDP since late 2010, and spending on durable goods was also near a five-year high, led by the automobile industry. Business investment rebounded, increasing 5.5 percent in the second quarter. Housing also was a positive, after having subtracted from growth in the past two quarters.

The first quarter, one of two quarters since the recession ended in which the economy contracted, now looks like an anomaly. Over the past year, the economy has grown 2.4 percent—slightly ahead of the 2.3 percent average we'd seen in the recovery prior to the winter-wrecked first quarter of this year.

Consumer Confidence Soars

The consumer confidence report that came out yesterday marked an important milestone. The reading for July was a surprising 90.9, up from 86.4 in June.  It was also the highest consumer confidence figure since October 2007 – the month before the recession started.

So consumer confidence is at its highest level in almost six years. That doesn’t mean it’s high on a relative level, though. The long-term average reading for this figure is 93.4. So even after six years of recovery, we are still below historic norms in terms of consumer confidence.

Today will bring more insight into the state of the economy, as the Commerce Department releases its first estimate of second quarter GDP. This comes on the heels of the very disappointing 2.9 percent contraction of the economy we endured in the first quarter. We’ll keep you posted on that figure as well.

How the Future Used to Look

Even the best investing experts struggle when it comes to making predictions about where the market is headed. Case in point: At the start of the year, the investing research firm Birinyi Associates tracked 18 strategists and found that their consensus was that the S&P 500 would rise by 5.3 percent in 2014.

 

The S&P is already up by about 8 percent on the year, so it looks like the expert forecast has already fallen short. On the other hand, the market could also drop between now and the end of the year, bringing the overall increase down to the initially projected level (although we’re all crossing our fingers that doesn’t happen).

 

Birinyi went back to its strategists for a revised prediction. The new consensus is that the S&P will rise by 7.4 percent on the year – leaving it roughly flat for the remainder of 2014.

IRAs Movin' On Up

If you have an IRA, how much money are you contributing to it every year? According to research from Fidelity, the average annual contribution to an IRA topped $4,000 for the first time last year. The average of $4,150 was 5.7 percent higher than it had been a year earlier.

Not surprisingly, that average varies greatly by age. People aged 60 to 69 made the highest IRA contributions, an average of $4,990. Those in their 30s contributed just $3,540 - but that was up 6.7 percent from the year earlier.

Add it all up, and IRA balances are now at an average of $89,100. That's a good sign that America is taking its retirement planning very seriously.