The S&P 500 Index’s historic washout continued yesterday, culminating in nearly a 10% loss for the day, and leaving the benchmark index officially in bear market territory, just 16 trading days after setting a record high on February 19. In addition, the S&P 500 has now moved more than 4% each day this week, leaving investors and professionals alike wondering when this volatility could end. While nobody knows for sure, one thing we always look for at market bottoms are signs of extremes, both from a sentiment and price perspective.
From an anecdotal sentiment perspective, certainly fears of COVID-19 have reached the masses, with travel plans canceled and announcements of major events called off coming nearly every hour. However, investor survey data shows a similar story with the American Association of Individual Investors (AAII) Investor Sentiment Survey showing the highest percentage of bears since April 2013. In addition, the National Association of Active Investment Managers (NAAIM) Exposure Index, which represents the average exposure to US equity markets by the surveyed investment managers, reached its lowest level since September 2015. Following each of those instances, the S&P 500 rallied more than 13% over the next year.
Another way of gauging sentiment can be from the internals of the market. While the S&P 500 is now well below its 200-day moving average, that doesn’t mean each stock in the index has moved below its respective 200-day moving average. In fact, regardless of the broad market’s washout trend, when less than 20% of the individual components of the index are trading below their 200-day moving averages, it is considered an extreme. As shown in the LPL Chart of the Day, Thursday’s sell-off left less 6% of the S&P 500 there, a number last seen in March 2009. “These are truly frightening times,” explained LPL Financial Senior Market Strategist Ryan Detrick. “However, it is important to remember that the signs of panic we are seeing are typically found at or near major market lows.”
Financially speaking, retirement might differ from your expectations. Just as few weathercasters can accurately predict a month’s worth of temperatures and storms, few retirees find their financial futures playing out as precisely as they assumed. Because of this, some common financial assumptions (and anxieties) about retirement are worth examining.
Information vs. instinct. When it comes to investment choices, many people believe they have a “knack” for choosing good investments. But what exactly is that “knack” based on? The fact is, the choices we make with our assets can be strongly influenced by factors, many of them emotional, that we may not even be aware … Continue reading “Making Investment Choices”
In corporate America, pension plans are fading away. Only 16% of Fortune 500 companies offered them to full-time employees in 2018, according to Willis Towers Watson research. In contrast, legal, medical, accounting, and engineering firms are keeping the spirit of the traditional pension plan alive by adopting cash balance plans.1
I’d like for you to meet my friend, Hugh. He’s a retired film stuntman who, after a long career, is enjoying his retirement. Some of what he’s enjoying about his retirement is sharing part of his accumulated wealth with his family, specifically his wife and two sons. Like many Americans, Hugh likes to make sure … Continue reading “The Gift Tax”
“Never confuse a single defeat with a final defeat.” — F. Scott Fitzgerald The economic struggles in our country are among the worst we’ve ever seen. In April, a record 20 million people lost their jobs, and 36 million people have filed for unemployment since the COVID-19 pandemic struck in mid-March. Record drops in consumer … Continue reading “Better Times Are Coming”
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