Americans
have long relied on standards and averages to help them gauge the performance
of everything from intelligence to athletics to the economy. So far, in 2014,
American stock markets have been grinding along without making much progress in
either direction and that has left many people looking for guidance about what
they can expect in the future.
Last
week, a writer at Barron’s enlisted Jeremy
Siegel, a finance professor at Wharton, to help explore the question by
updating data used in a 2009 article. That piece had looked at the performance
of the U.S. stock market over 142 years and found “below-average returns over
five- and 10-year periods generally are followed by above-average returns in
the next five and 10 years.” In the new article, Siegel and his associates
looked at rolling five-, 10-, 20-, and 30-year return periods through the end
of 2013 and found:
“For the 60 months ended in
April, the compounded annual real return was nearly 17 percent, well above the
median 7.17 percent for all five-year periods. (Taxes and investment fees
aren't included.) That suggests the next five years could run below the
average.
While that might temper
bullishness, in the 120-month period ended April, the compounded annual real
return was just 5.58 percent, a full percentage point below the 6.64 percent
median 10-year annual return for all the periods measured – again, since 1871.”
Despite the mixed signals provided by long-term
averages, Siegel told Barron’s “the
odds-on bet” is the Dow Jones Industrial Average will hit 18,000 by the end of
the year (although there may be corrections along the way). His expectations
are interest rates will remain lower than has been suggested and earnings will
experience strong growth.
It’s
a good idea to take the esteemed professor’s thoughts with a grain of salt. An
eight-year study of market pundits found they were right about 47 percent of
the time.
the market
isn’t the only thing that can put a hitch in your financial plan’s giddy-up. The overall rate of divorce in the United States trended
lower between 2000 and 2011 (the latest dates the Centers for Disease Control has made
available). In 2000, there were about four divorces or annulments per 1,000
Americans (total population). By 2011 that rate had fallen slightly to 3.6 per
1,000. As they often do, Baby Boomers bucked the trend. The divorce rate for
Americans over age 50 has trended higher. The
New York Times wrote:
“A half-century ago,
only 2.8 percent of Americans older than 50 were divorced. By 2000, 11.8 percent
were. In 2011, according to the Census Bureau’s
American Community Survey, 15.4 percent were divorced and another 2.1
percent were separated. Some 13.5 percent were widowed.
While divorce rates
over all have stabilized and even inched downward, the divorce rate among
people 50 and older has doubled since 1990, according to an analysis of census
data by professors at Bowling Green State University in Bowling Green, Ohio.
That’s especially significant because half the married population is older than
50.”
Anytime you experience a
significant life change, such as a divorce late in life, it’s important to let
us know. We can offer strategies to help compensate for any cash flow
disruption and tactics for managing taxes when splitting large assets, such as
qualified retirement plans. In addition, we can help with essential (and often
forgotten) steps, including reviewing and revising beneficiary designations (on
retirement plans, investment accounts, and insurance policies) as well as
modifying powers of attorney, named trustees, and other designations. We also
can coordinate our efforts with those of your attorney and/or accountant.
Weekly Focus –
Think About It
“Good judgment comes from experience, and a lot of that
comes from bad judgment.”
--Will Rogers, American humorist and commentator
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