The Truth About Present-Day Retirement

Times have changed and so has retirement! Nowadays, retirement is no longer what people once expected. If you’re preparing to retire, the way your parents did, you might be stuck in the past and need to face present-day reality. So, what has changed in the last 10 years? Well, the factors below will shift your perspective about how you should be preparing for retirement!

First, with all the advancements of medicine and technology that we’ve had in this last decade, it’s no surprise that people are living longer. In the past, living 30 years after retirement, was actually outside the norm of an adult’s lifespan. Therefore, the 4% safe withdrawal rate that many financial planners followed was a valid rule of thumb. This guideline told retirees that if they took out only 4% of their assets and adjusted to inflation in their retirement portfolio, the risk of running out of money 30 years after they retired was very low.

But it’s no longer the case! If you’re saving conservatively for an amount that would last you around 30 years, disregard the 4% rule. People are now living past the age of 95 and a good amount of them are even retiring early. The average portfolio return for the standard investor has also decreased and is subject to more risk from the impacts of market volatility. The chances of outliving your nest egg is a lot higher these days.

Not only are people starting to live longer, the divorce rate is also significantly higher. You can no longer assume that you’ll still be married once you retire! How is that an issue, you ask? Well, a divorce could be a serious stumbling block for your retirement plan since your income might be cut in half during your golden years. Not to mention, your retirement assets might be split among you and your ex-spouse. Because of a divorce, you’ll most likely have to change your retirement strategy and lifestyle.

Have you noticed that everything costs a lot more than it used to? Some of this increase can be a result of natural inflation in prices. But, according to our government, inflation is very tame and under control. Yet, the cost of everyday goods is a lot higher and will keep outpacing inflation throughout your retirement. And it is not just everyday expenses that you’ll need to factor into your budget, there’s the added healthcare costs as well. Given the fact that there’s a good chance you’ll live longer, there are more medical issues you’ll be susceptible to. Not to mention the fact that your chances of getting injured or breaking something will dramatically increase. This means a lot more medical bills and trips to the doctor’s office! On top of that, the fact that a third of us will require some sort of assistance or nursing care, and you can see how retirement costs can skyrocket! Basically, retirement is not as cheap as it used to be.

Finally, if you think about your assets, it’s safe to assume that your home is your most valuable one. You may be able to sell it at a profit, assuming that the value has increased over the years. However, that might be a misconception! In order to determine whether or not you’ll actually get a return on your investment, you’ll need to adjust for inflation and taxes. Also, if we experience any major volatility in the housing market like we did in the past, you might not be able to get as much money for your property as you expected. Like all markets, the real estate market can be unpredictable.

So, with all of these changes, how can one successfully save for retirement? Well, my biggest recommendation for every pre-retiree that I talk to is, BE PREPARED! It’s always better to set your retirement savings goal beyond your expected amount, than below it. With the unpredictability of divorce, age, and the financial markets, it’s better to be safe than sorry. If you aim higher and save more, then your risk of running out of money during retirement will be a lot lower. Part of being prepared is to work closely with a financial planner that can guide your through your Golden Years. This ‘financial coach’ should be able to point out pitfalls that you might not have even thought of. It’s their job to make sure that you’re on track and don’t fall victim to your own wrongdoings. As well as to create a retirement game plan and an investment road-map that takes taxes and your risk tolerance into consideration.

Being prepared for retirement can be a daunting task. Especially given all the unknowns out there. But with proper preparation and guidance from a financial professional, you can glide into retirement knowing full well that you’re ready for the challenge!

Why We Think Munis are Offering a Buying Opportunity Now

Municipal bond prices have taken a beating lately and I don’t believe that the downward move is justified. As Jon Rocafort of Eaton Vance points out in his blog post below, this might be a great buying opportunity!

 

Jon Rocafort, Co-Director of SMA Strategies at Eaton Vance

We think the extreme move in the municipal bond market after the U.S. election may offer an attractive entry point for investors.

Let’s start with some historical context on the recent spike in muni yields, which has sent bond prices lower. The BofA Merrill Lynch Municipal Master Index lost 3.7% in November, its largest one-month decline since 2008. Zooming out a bit, we have witnessed one of the largest five-month increases in yields on record.

Our view is that this historic move has created an emerging opportunity to lock in higher yields and potentially generate higher future returns. For investors lamenting the “sticker shock” of low muni yields recently, this could be their chance to enter the sector or add to existing holdings.

The chart below illustrates the resilience of the municipal market and demonstrates that sharp increases in municipal yields have created buying opportunities and rewarded investors with strong returns in subsequent months. Although as always, past performance is no guarantee of future results.

10-yr-muni-b

The noticeable yield upswings in 2008, 2010 and 2013 all offered investors the chance to buy munis at not only higher yields, but also at attractive valuations. For example, the 2010 scare was driven by analyst Meredith Whitney’s prediction of hundreds of billions of dollars of muni defaults – that never materialized. Also, during the 2013 “Taper Tantrum” both Treasury and municipal yields rose sharply after the Federal Reserve said it would start slowing its bond purchases.

We may be witnessing another overreaction in the bond market. Many of Donald Trump’s plans, including tax cuts and fiscal stimulus, would come with very high price tags and likely be challenged by fiscal hawks in Congress. At this point, it’s extremely difficult to predict what will actually be passed, in what form, and over what horizon. In our view, the “Trump rally” in stocks and the sell-off in bonds are based on very little detail on the President-elect’s policy initiatives, and seems driven more by speculation.

And even if the Trump administration succeeds in reducing personal income tax rates, muni yields still look attractive. First, the ratio of 10-year AAA muni yields versus 10-year U.S. Treasury yields has risen from 93% before the election to about 105% (higher ratios indicate cheaper muni valuations). Also, as we have discussed recently in a separate blog, historical changes in the highest marginal tax bracket have not had a material impact on the relative valuation of muni bonds over the medium to long term.

Bottom line: Treasury and municipal bond yields have seen an extreme short-term reaction after the U.S. election. It is surprising what has taken place without more actual detail. The move could be an overreaction that gives investors a chance to scale into munis at higher yields and cheaper valuations – an opportunity similar to what developed following 2008, 2010 and 2013.

 

 

 

 

 

An imbalance in supply and demand in the municipal market may result in valuation uncertainties and greater volatility, less liquidity, widening credit spreads and a lack of price transparency in the market. There generally is limited public information about municipal issuers. As interest rates rise, the value of certain income investments is likely to decline. Rising interest rates could reduce the value of the bonds in the portfolio, thus adversely affecting the value of the overall investment.

Source: Eaton Vance

As Carly Simon Used to Sing, “We Can Never Know About the Days to Come…”

Medicare
Shutterstock

However, that doesn’t stop anyone from making educated guesses about the future of companies, financial markets, and economies. As we enter the second quarter, investment and business professionals have been offering their insights:

  • McKinsey & Company’s March Economic Conditions Snapshot indicated 80 percent of surveyed executives “…expect demand for their companies’ products and services will grow or stay the same in the coming months, and a majority believe (as they have in every survey since 2011) their companies’ profits will increase.” However, they are not as optimistic about the global economy as they were in December. About one-half of executives in developed and emerging markets said economic conditions globally are worse than they were six months ago.
  • The Wall Street Journal’s April 2016 Economic Forecasting Survey, which queries 60 economists, reported three-of-four survey participants expect a Fed rate hike in June. Few expect a recession during the next 12 months, putting the odds at 19 percent. Almost one-half stated global risks were the greatest threat to the U.S. economy, followed by financial conditions, a slowdown in consumer spending, falling corporate profits, and U.S. politics.
  • PIMCO’s Cyclical Outlook predicts China’s gross domestic product (GDP) growth may be in the 5.5 to 6.5 percent range. The target is 6.5 percent. In addition, a gradual devaluation of the yuan is possible, although China’s currency policy often produces unexpected twists and turns.
  • BlackRock Investment Institute’s second quarter outlook centered on three themes. First, returns are likely to remain muted in the future. Second, monetary policies appear to be less divergent, which could be a positive for some markets. Third, volatility may persist as the Federal Reserve normalizes monetary policy. Diversity and careful asset selection are likely to be critical in this environment.

While it’s interesting to read experts’ predictions and expectations for coming months and years, it’s important to remember forecasts are not always accurate. An organization that tracked forecasting results through 2012 found forecasts were correct about 47 percent of the time.

Weekly Market Commentary: April 11, 2016

© Lucy Nicholson/Reuters
© Lucy Nicholson/Reuters

We all learned a thing or two about Panama last week.

The country is not the home of the Panama hat, which is made in Ecuador. However, it is the only place in the world where you can watch the sun rise on the Pacific Ocean and set on the Atlantic Ocean.

It’s also home to a lot of offshore companies, according to the millions of records leaked from the world’s fourth largest offshore law firm. The Guardian reported 12 national leaders were among 143 politicians, athletes, and wealthy individuals (including family members and associates) who were participating in offshore tax havens.

It’s not illegal to hold money in an offshore company, unless the company facilitates tax evasion or money laundering, reported The New York Times. Further investigation will be required to know whether that was the case. CNBC suggested financial markets could be affected if the findings lead to greater regulation of foreign banks or prosecutorial action against them.

While the Panama scandal captured a lot of attention, it didn’t have much of an impact on markets. News that the U.S. Treasury was cracking down on corporate inversions, along with indications the U.S. Federal Reserve may raise rates twice during 2016, caused stocks to dip late in the week. Some major U.S. indices finished the week lower. (Corporate inversions are mergers that give U.S. companies a foreign address and lower their tax rates.)

We may be in for another round of market volatility. Corporate earnings season is here. That’s the period when publicly traded companies report how well they performed during the previous quarter. CNBC said, “Over the past 10 years, the emergence of first-quarter earnings reports has generally corresponded with a rise in volatility.”

Data as of 4/8/16 1-Week Y-T-D 1-Year 3-Year 5-Year 10-Year
Standard & Poor’s 500 (Domestic Stocks) -1.2% 0.2% -1.7% 9.4% 9.0% 4.7%
Dow Jones Global ex-U.S. 0.3 -2.5 -14.2 -1.5 -2.5 -0.7
10-year Treasury Note (Yield Only) 1.7 NA 1.9 1.7 3.6 5.0
Gold (per ounce) 2.1 16.7 2.7 -7.7 -3.4 7.6
Bloomberg Commodity Index 1.4 0.6 -20.4 -16.2 -14.6 -7.3
DJ Equity All REIT Total Return Index -0.4 5.7 4.3 8.7 11.9 7.0

S&P 500, Dow Jones Global ex-US, Gold, Bloomberg Commodity Index returns exclude reinvested dividends (gold does not pay a dividend) and the three-, five-, and 10-year returns are annualized; the DJ Equity All REIT Total Return Index does include reinvested dividends and the three-, five-, and 10-year returns are annualized; and the 10-year Treasury Note is simply the yield at the close of the day on each of the historical time periods.

Sources: Yahoo! Finance, Barron’s, djindexes.com, London Bullion Market Association.

Weekly Advisor Analysis: April 6, 2016

Domestic equity markets were pushed higher last week by dovish comments from the Federal Reserve and cooperative economic data that didn’t change expectations for future rate hikes. The Dow Jones Industrial average rose 1.6 percent while the S&P 500 climbed 1.8 percent. The NASDAQ gained 3 percent. This closed out a first quarter where the S&P 500 appreciated 0.8 percent – a small miracle given its collapse during the first several weeks of 2016.

Goldilocks Gets a Job

The Labor Department released March jobs figures on Friday. This is the last report before the Federal Reserve’s next meeting in late April. According to the figures, U.S. employers added 215,000 jobs in March, slightly above consensus expectations and roughly in line with the average monthly gain for the past year. The unemployment rate ticked up slightly to 5 percent, but this is largely the result of more Americans looking for jobs. For the month, the participation rate rose to 63 percent, a good sign as an improving economy and slightly rising wages encourage out-of-work Americans to begin looking for jobs again. The average hourly earnings rate rose 2.3 percent year-over-year to $25.43.

IPO Market Dries Up

The volatility in the equity markets during 2016 has taken a toll on initial public offerings. So far this year, only nine companies have gone public raising just $1.2 billion. This is the lowest number of deals since the depths of the financial crisis when two firms raised $830 million in the first quarter of 2009. Interestingly, while nine deals were completed, more than twice as many companies shelved plans at the last minute due to the market turbulence. This marks only the 15th quarter since 1995 where the number of withdrawn public filings exceeds the number of completed listings. This is extremely unusual given markets are hovering near all-time highs.

WAAAA1

Gold Shines During First Quarter

Gold surprised several investors during the start of 2016 with a 16.5 percent rally during the first three months of the year. This marks the largest quarterly gain in three decades. Most of the rise was recorded during the first few weeks of the year, which is not unusual given the slump in stocks. However, the precious metal added to its gains even as stocks rallied in the back half of the quarter. Is this a sign the recent stock rally isn’t sustainable? A precursor to pending uncertainty given the U.S. election trajectory? Or, simply a response to the continued dovish stance by most central banks? Only time will tell. The rise in the commodity has also pushed gold mining equities higher. Some of the largest players have witnessed stock appreciation of around 50 percent so far in 2016.

WAAAA2

Fun Story of the Week

Have you ever wanted to change your name? Perhaps you are tired of it, your parents saddled you with something you just don’t like, or the combination of your newly married name sounds silly. Some people have a very different reason for wanting to do so: their name breaks the internet. Jennifer Null has this problem. Whenever she fills out an online form to buy books or a plane ticket, she is greeted with a message to fill in her last name and try again. Most programmers know that “null” is the default database entry when a field is left blank, so her last name is fooling the computer and won’t let her proceed with her transaction. She must call and complete the transaction by phone. These types of problems are called “edge cases” by programmers; the one in a millionth example that doesn’t work. But, as the world becomes more global, they are occurring more frequently. For these people, however, there is hope as serious discussions among programmers to improve support for “edge case” names have occurred.

Weekly Market Commentary: April 4, 2016

Provided by geralt/Pixabay
Provided by geralt/Pixabay

It’s like déjà vu all over again!

This wasn’t the first quarter, or even the first year, that bond markets have not performed in the way Wall Street strategists have expected.

During 2014, bond yields were expected to rise. They did not.

During 2015, bonds were predicted to finish the year yielding about 2.8 percent to 3.3 percent. On December 31, they were at about 2.3 percent.

During the first quarter of 2016, despite persistent predictions yields would move higher after the Federal Reserve’s rate hike, yields fell and bond values increased. Government bonds delivered the strongest returns gaining 3.7 percent for the quarter, according to Bloomberg.

There is an inverse relationship between interest rates and bond prices. When rates move higher, bond prices move lower, and the value of investors’ holdings may fall. When rates move lower, bond prices move higher, and the value of investors’ holdings may increase.

The current bull market in bonds started in 1982. During January of that year, the 10-year U.S. Treasury yield was about 14.6 percent. Since then, rates on Treasuries have declined and investors have reaped the rewards of steadily rising bond values.

The Federal Reserve began tightening monetary policy in December 2015 by raising the fed funds rate. Late in the month, the rate on benchmark 10-year Treasury bonds reached about 2.3 percent. However, after central banks in Europe and Japan loosened their monetary policies, yields on Treasuries moved lower. By the end of the first quarter of 2016, they were at about 1.8 percent.

Overseas, the picture was a bit more complicated. An expert cited by Bloomberg explained, “Of the five countries that performed best – Germany, Belgium, Denmark, Japan, and the United Kingdom – the two-year debt of all but the United Kingdom has negative yields.”

When bonds have negative yields, investors are paying to lend their money. Why would anyone do that? The Economist reported there are three types of investors who buy bonds when yields are negative: 1) central banks and other entities that must own government bonds, 2) investors who expect to make money when a country’s currency gains value, and 3) investors who would rather suffer a small loss in government bonds than risk a bigger loss investing in something else.

That something else might have been a stock market during the first month or so of the quarter.

Globally, stocks underperformed bonds, returning 0.4 percent for the first quarter of 2016. However, the end-of-quarter return doesn’t really tell the whole story. Fears of global recession, among other things, produced a wild ride for stock market investors during the first months of the year. Worldwide, stocks were down about 11.3 percent through mid-February, according to Barron’s, and then gained 13.2 percent to end the quarter slightly higher, overall.

The United States delivered strong returns for the period. Barron’s reported:

“Still, the United States fared a good deal better than other developed markets, with Europe down 2.4 percent, the United Kingdom off 2.3 percent, and Japan worse by 6.4 percent – a surprise because overseas markets were touted as the places to be. That is, except for emerging markets; but their results also confounded the seers, as they returned a robust 5.8 percent for the quarter.”

At the end of last week, the Bureau of Labor Statistics’ monthly jobs report showed more people were looking for jobs, increases in employment exceeded analysts’ expectations, and average hourly earnings had moved higher. These were positive signs for the U.S. economy.

Data as of 4/1/16 1-Week Y-T-D 1-Year 3-Year 5-Year 10-Year
Standard & Poor’s 500 (Domestic Stocks) 1.8% 1.4% 0.6% 9.9% 9.2% 4.8%
Dow Jones Global ex-U.S. 0.3 -2.8 -12.5 -1.8 -2.2 -0.6
10-year Treasury Note (Yield Only) 1.8 NA 1.9 1.8 3.5 4.9
Gold (per ounce) -0.6 14.3 1.4 -8.5 -3.1 7.5
Bloomberg Commodity Index -1.7 -0.8 -22.0 -17.0 -14.4 -7.3
DJ Equity All REIT Total Return Index 3.3 6.1 5.0 9.9 11.5 6.7

S&P 500, Dow Jones Global ex-US, Gold, Bloomberg Commodity Index returns exclude reinvested dividends (gold does not pay a dividend) and the three-, five-, and 10-year returns are annualized; the DJ Equity All REIT Total Return Index does include reinvested dividends and the three-, five-, and 10-year returns are annualized; and the 10-year Treasury Note is simply the yield at the close of the day on each of the historical time periods.

Sources: Yahoo! Finance, Barron’s, djindexes.com, London Bullion Market Association.

If You Could Live Anywhere, Where Would You Live?

© Provided by CNBC
© Provided by CNBC

If cities are your cup of tea, then here is some good news. The 2016 Worldwide Cost of Living Report compares the prices of 160 products and services – from food and drink to domestic care and private schools – in cities around the world. It found the cost-of-living in many cities fell during 2015 thanks to lower commodity prices, weakening currencies, and geopolitical unrest.

Be warned: a lower cost-of-living doesn’t mean a city offers good value. Take Zurich, for instance. Remember the uproar when the Swiss unpegged their currency early in 2015? The Swiss franc realized double-digit gains, the Swiss stock market swooned, and the Swiss people went shopping in neighboring countries. Well, the cost of living in Zurich fell from September 2014 to September 2015, but the decline wasn’t proportionate to declines elsewhere in Europe, and Zurich currently reigns as Europe’s most expensive city.

In September 2015, the most and least expensive cities in the world were:

Most expensive:

  • Republic of Singapore
  • Zurich, Switzerland
  • Hong Kong, China
  • Geneva, Switzerland
  • Paris, France

Least expensive:

  • Chennai, India
  • Karachi, Pakistan
  • Mumbai, India
  • Bangalore, India
  • Lusaka, Gambia

Cities in the United States didn’t fare well, either. A strong U.S. dollar helped push all 16 of the U.S. cities that were in the survey up at least 15 places. New York and Los Angeles both rank among the 10 most expensive cities in the world.

Weekly Market Commentary: March 28, 2016

Provided by geralt/Pixabay
Provided by geralt/Pixabay

Are corporations in the United States struggling?

In its cover article last week, The Economist (a British publication), suggested there is not enough competition among American companies. It pointed out:

“Aggregate domestic profits are at near-record levels relative to GDP… High profits might be a sign of brilliant innovations or wise long-term investments were it not for the fact that they are also suspiciously persistent. A very profitable American firm has an 80 percent chance of being that way 10 years later. In the 1990s the odds were only about 50 percent.”

At the end of last week, U.S. headlines indicated concern about declining corporate profits:

  • Consumers prop up U.S. economy, but profits under pressure
  • S. Fourth-Quarter GDP Revised Up to 1.4% Growth but Corporate Profits Fall
  • Corporate profits fall in 2015 for first time since Great Recession
  • S. Corporate Profits Fall 8.1% in 4th Quarter

So, are U.S. companies experiencing record profits or are they in trouble?

Last week’s press release from the Bureau of Economic Analysis indicated corporate profits (after inventory valuation and capital consumption adjustments) declined from the third quarter of 2015 to the fourth quarter of 2015; hence, the headlines.

However, a one-quarter decline doesn’t provide a complete picture of the health of corporate America. As CFO.com pointed out, over the full year, corporate profits were up 3.3 percent year-to-year.

Trading Economics offered additional context. From 1950 through 2015, U.S. corporate profits averaged about $395 billion annually. Profits hit a record low for that period, $14 billion, during the first quarter of 1951. Profits rose to an all-time high of about $1.64 trillion during the third quarter of 2014.

Fourth quarter’s profits of $1.38 trillion remain well above that average.

Data as of 3/24/16 1-Week Y-T-D 1-Year 3-Year 5-Year 10-Year
Standard & Poor’s 500 (Domestic Stocks) -0.7% -0.4% -2.7% 9.5% 9.2% 4.7%
Dow Jones Global ex-U.S. -2.1 -3.1 -14.1 -2.0 -2.0 -0.5
10-year Treasury Note (Yield Only) 1.9 NA 1.9 1.9 3.4 4.7
Gold (per ounce) -2.5 14.9 2.5 -8.6 -3.3 8.2
Bloomberg Commodity Index -1.9 0.9 -20.8 -16.8 -14.0 -7.0
DJ Equity All REIT Total Return Index -1.2 2.7 -0.2 9.3 11.6 6.3

S&P 500, Dow Jones Global ex-US, Gold, Bloomberg Commodity Index returns exclude reinvested dividends (gold does not pay a dividend) and the three-, five-, and 10-year returns are annualized; the DJ Equity All REIT Total Return Index does include reinvested dividends and the three-, five-, and 10-year returns are annualized; and the 10-year Treasury Note is simply the yield at the close of the day on each of the historical time periods.

Sources: Yahoo! Finance, Barron’s, djindexes.com, London Bullion Market Association.

Here’s a Milestone You Don’t Reach Until Your Seventies

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Provided by LifeHack

The major milestones of older Americans are not attended with the same sense of wonder that accompanies the major milestones of younger Americans. Sure, registering for Social Security benefits and signing up for Medicare are rites of passage, but they don’t hold a candle to earning your driver’s license, receiving your first kiss, winning your first promotion, or dancing at your wedding.

If you have retirement accounts when you become a septuagenarian, then you’ll encounter a milestone the Internal Revenue Service (IRS) strongly encourages you to remember. Beginning April 1 of the year following the year in which you reach age 70½, you must begin taking required minimum distributions (RMDs) from most of your retirement accounts. Forbes offered this list:

  • Traditional IRAs
  • Rollover IRAs
  • Inherited IRAs
  • SEP IRAs
  • SIMPLE IRAs
  • 401(k), 403(b), and 457(b) plan accounts
  • Keogh plans

There currently are no RMDs for Roth IRAs, unless the accounts were inherited.

If you have more than one qualifying retirement account, then a separate RMD must be calculated for each account. If you want to withdraw a portion of each account, you can, but it may prove simpler to take the entire amount due from a single account. Once you start, you must take RMDs by December 31 every year. If you don’t, you’ll owe some hefty penalty taxes.

The IRS offers some instructions for calculating the RMD due. “The required minimum distribution for any year is the account balance as of the end of the immediately preceding calendar year divided by a distribution period from the IRS’ “Uniform Lifetime Table.” A separate table is used if the sole beneficiary is the owner’s spouse who is ten or more years younger than the owner.”

If you would prefer to have some help figuring out the correct amount when RMDs are due, contact your financial professional.

Weekly Market Commentary: March 21, 2016

Provided by geralt/Pixabay
Provided by geralt/Pixabay

There is ongoing debate about whether markets behave in rational ways.

The efficient market hypothesis suggests it’s impossible to outperform the stock market because current share prices reflect all relevant information. In other words, stocks should always trade at fair value and it should be impossible to invest in a stock that is overpriced or underpriced.

The Economist reported there are two issues efficient market theorists have trouble explaining. The first is market bubbles, “where entire markets get out of whack with traditional valuation measures and then collapse.” The other is pricing anomalies. For instance, value stocks are inexpensive relative to their asset values and tend to outperform over the long term. In a perfect market, pricing anomalies shouldn’t occur.

During the past few weeks, U.S. stock markets have recovered from losses suffered earlier in the year and moved into positive territory for 2016. The shift into positive territory has some suggesting markets may not be correctly priced, but there is disagreement about whether it currently is overvalued or undervalued.

According to Barron’s, the recent strong performance of U.S. stock markets hasn’t been inspired by sound decisions and rational economic behavior. “The market’s valuation, at 17 times consensus analyst earnings-per-share estimates for 2016, looks stretched again, given that easy monetary policy and rising oil prices – not earnings growth – are responsible.”

Wharton Professor of Finance Jeremy Siegel disagreed. “On an absolute basis [the stock market is] slightly more highly valued than average but relative to interest rates, which are extremely low, it is actually undervalued in my opinion.”

Investors who believe markets perform well most of the time, but not all of the time, may want to take opportunities like these to look for companies whose shares may be mispriced, as well.

Data as of 3/18/16 1-Week Y-T-D 1-Year 3-Year 5-Year 10-Year
Standard & Poor’s 500 (Domestic Stocks) 1.4% 0.3% -2.4% 9.7% 9.9% 4.6%
Dow Jones Global ex-U.S. 1.6 -1.0 -11.0 -1.6 -0.9 -0.3
10-year Treasury Note (Yield Only) 1.9 NA 2.0 2.0 3.3 4.7
Gold (per ounce) -1.0 17.9 9.1 -7.9 -2.5 8.5
Bloomberg Commodity Index 1.0 2.8 -17.8 -16.3 -13.3 -6.6
DJ Equity All REIT Total Return Index 2.2 4.0 2.4 9.8 11.8 6.3

S&P 500, Dow Jones Global ex-US, Gold, Bloomberg Commodity Index returns exclude reinvested dividends (gold does not pay a dividend) and the three-, five-, and 10-year returns are annualized; the DJ Equity All REIT Total Return Index does include reinvested dividends and the three-, five-, and 10-year returns are annualized; and the 10-year Treasury Note is simply the yield at the close of the day on each of the historical time periods.

Sources: Yahoo! Finance, Barron’s, djindexes.com, London Bullion Market Association.