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2019 market roller coaster

While a volatile stock market is often referred to as a roller coaster ride, the closing days of 2018 seemed to have been the next step up.

After a prolonged growth period, the market moved into a new record-setting path of volatility. And some financial pundits suggest that it may continue in the new year. Welcome to the new reality of 2019.

The week before Christmas, the Dow notched its worst weekly loss in a decade. This was followed by a Christmas Eve drop that was the worst on that date in the stock market’s history. These precipitous declines propelled the market to the edge of a bear market, which is considered a 20% decline from the market’s most recent high point.

Then, the Dow whiplashed to climb by 1,000 points. This was the highest one-day point gain ever. called these events “a head-spinning, jaw-dropping 10 days in the markets.”

But with healthy employment figures and a surge of buoyant holiday shopping, how did things get here? And what could the new market volatility mean for those trying to plan for a successful retirement—and for those who already retired?

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stock market interest rates hike

Earlier this year, equity analysts started reaching for the Motrin again as market volatility came back to town. After a prolonged period of growth, U.S. stocks began charting a new path of ups and downs.

Scores of commentators observed the change in market winds. Even Jack Bogle, founder of Vanguard, said the newfound market swings were unlike anything he had ever seen in his 60-plus years of investing. "I have never seen a market this volatile to this extent in my career," he said in an appearance on the CNBC show "Power Lunch."

And now, this volatility trend seems to have continued. Last week, on October 10, the Dow Jones fell more than 800 points. It was the largest drop since February 2018. Meanwhile, the S&P 500 declined 3.3% and the Nasdaq fell 4%, according to CNBC reporter Fred Imbert.

Then on Wednesday, October 17, the market took a slight stumble as the Federal Reserve released the minutes from its September meeting. A month earlier, Fed board members approved a quarter-point hike to the central bank’s benchmark rate, setting a new rate range of 2% to 2.25%.

The minutes indicate that future rate hikes may be ahead. According to meeting records, Fed officials believe that "further gradual increases in the target range for the federal funds rate would be most likely consistent with a sustained economic expansion, strong labor market conditions, and inflation near 2 percent over the medium term." 

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where are equity markets headed

Evergreen market positivists, take a seat. It seems equity market instability is taking over financial headlines again.

With the tit-for-tat trade war taking shape between the U.S. and a good portion of the rest of the industrialized world, analysts are once again reaching for—if not yet raising—their red flags.

MarketWatch recently featured this eyebrow-raising headline: "The Dow and S&P 500 are 10 trading days away from their longest corrections since 1984."

And in a story about some of the worst layoffs in 2018, declared: "Let the layoffs continue. It's been a rough ride for some companies so far in 2018. The tariffs have spooked many industrial companies, as well as automakers. The market is flip flopping all over the place."

Barron’s unique take on this hot topic centered around legendary market technician Ralph Acampora, who is a pioneer in the field of chart-based trading.

Barron’s said Acampora "is growing increasingly concerned about recent moves in the stock market, notably in the Dow Jones Industrial Average." They added that "the primary utility of reading charts is a 'risk management' function, and what he's observing currently suggests that the bullish dynamic in equities may be unraveling."

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equity market growth slowdown trend

Many economists and market watchers point to both national and global indicators that seem to suggest the heady days of continued market growth may be behind us. The stock market is in its 3rd-longest stretch without a new high since 2013, according to Bespoke Investment Group, which had a market commentary recently featured on

"The Dow is around 9.2% lower from its late-January peak, while the S&P 500 is more than 8% short of its peak. By comparison, the S&P 500 achieved a max drawdown of more than 14% during a commodity and emerging-market selloff fueled by worries over China, according to Bespoke," MarketWatch reported.

Bespoke says the current slump hasn’t been unusually dramatic or long, but it has "kept equities in check after a very big run up in late 2017."

Several economic barometers have recently fallen short of expected growth projections. U.S. retail sales fell unexpectedly in January and then failed to meet expectations the following month. The U.S. added 103,000 jobs in March, well below expectations of 178,000, according to The Wall Street Journal, which noted that hiring remained strong.

Goldman Sachs’s global "current activity indicator" weakened notably in March. A record 74% of fund managers polled by Bank of America then said that the global economy was now in its "late cycle," according to a recent article in the Financial Times.

"Given that investors are already growing increasingly nervous about escalating trade tension — global equities have tumbled by more than 8 percent from their late-January peak — the bout of disappointing economic data could not have come at a worse time," the Times reported.

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market meltup over morgan stanley

The stock market certainly delivered an exciting start to 2018.

The S&P 500 climbed 7.5% between late December and January 26, when it recorded the last in a string of record closes at 2,872.87. That fateful Friday in January was also the day the Dow Jones Industrial Average reached its record high of 26,616.71.

That may have been the end of a much-anticipated "meltup," which CNBC reporter Sue Chang writes is defined as an unexpected rise in asset prices as a fear of missing out (FOMO) drives investors to surge into the market. Think of it as the opposite of a meltdown. But like a party that gets out of control, what often follows a meltup may be quite a slow clean-up.

One prominent analyst says 2018 peaked early and we shouldn’t expect much growth for the rest of the year.

"We think January was the top for sentiment, if not prices, for the year. With volatility moving higher we think it will be difficult for institutional clients to gross up to or beyond the January peaks," said Michael Wilson, chief U.S. equity strategist at Morgan Stanley Institutional Securities, in his weekly note on March 19, 2018.

"Retail sentiment indicators also look to have peaked in January and we do not see anything on the horizon to get retail investors more bullish than they were following a tax cut."

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 recent market volatility sign of things to come

There is no doubt that individual investors were hit hard by the financial crisis. Several months of double-digit negative stock market returns almost halved investor portfolio values from April 2008 to March 2009, according to Netspar (the Network for Studies on Pension, Aging, and Retirement).

If you think losing a significant proportion of your nest egg sounds like a life event that would color future money choices, you might be surprised by a November 2017 survey.

When Hartford Funds asked people about the lasting impact of the market meltdown and the ensuing “Great Recession,” 40 percent of them said the financial crisis of 2008 has had no lasting impact on their life. A higher number though, 42 percent, said they now avoid the market. And 46 percent of respondents said they have adjusted their spending and savings habits in the aftermath. 

Interestingly, people have made investment and lifestyle changes in the wake of that momentous market downturn—including avoiding the market all together—yet the perception of its impact has faded for many.

"Americans are forgetting what it felt like during those challenging times of 2008-11," according to a Hartford Funds executive.

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As 2017 has rolled by, many headlines have documented new economic upsurges. U.S. stocks saw record growth, foreign equity markets rose in value, and domestic unemployment fell to its lowest rate since 2000.

Then tax reform legislation was passed, and now optimism is growing for what the New Year may hold. Nonetheless, while all of this is positive, a number of market risks could reverse the growth trends of 2017.

In a recent Global Markets Research report, Deutsche Bank mentions 30 potential game-changers that can influence the economic landscape in 2018 – and even bring market reversals. As you review your financial picture for the New Year, here are some important risks of which to take note.

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 new york stock exchange

As the financial press reported, U.S. stocks continue to inch forward or hold steady. Stock market indices opened with trading in positive territory, even as Hurricane Harvey affected refineries and other energy facilities. But while the market showed positive trends, it was a report, published last week by Bank of America Merrill Lynch (BoAML), which caught the eye of many.

On Thursday, August 24, BoAML reported investors have been fleeing stocks in a frenzy that hadn’t been seen for years. According to Evelyn Cheng with CNBC, investors had pulled an estimated $30 billion from U.S. stock funds over the past 10 weeks. That added up to the longest stock outflow streak since 2004.

The 10-week strain of withdrawals occurred despite market highlights, including a 1% gain by the S&P 500 for the quarter.  Contrastingly, Cheng noted that foreign markets posted strong inflow gains. European stocks, Japanese stocks, and emerging markets saw inflows of $36 billion over the last 10 weeks.

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is the market set to correct

Update: Just moments ago, the Dow Jones Industrial Average hit 22,000 points -- a 20% increase from election season as well as an all-time high! The rise was attributable to strong earnings by Apple and other companies. Read on for some insights and opinions from experts and commentators about what may be ahead.

While the U.S. stock market hits red-hot highs, many investors wonder if a market correction may be ahead. With reports of upbeat corporate earnings in, the Dow Jones reached 21,982 points on Tuesday, at one point reaching an intra-day all-time high of 21,990.96 points. As of last Friday, 73% of the S&P 500 companies posting earnings reports had sales figures above estimates, as reported by FactSet.

Likewise, other indices saw growth. The S&P 500 attained 2,476, just a few points shy of its record-setting high at 2,484.04 in the week prior. And the Nasdaq rose to 6,375, putting on the pathway to setting a new record of its own.

While nobody knows what the future holds, economists and stock market experts say there is a growing possibility the market will end its current upward trajectory and correct itself. And the issue? Potentially overinflated stock valuations.

“There are many indicators showing that equities have reached a higher valuation than is consistent with changes in either underlying economic growth or revenue fundamentals,” commented Aaron Klein, a fellow in Economic Studies and Policy Director for the Center on Regulation and Markets at the Brookings Institution, to NBC News.  

With stocks holding steady against political dysfunction in Washington, D.C. – not to mention as-yet-to-be-delivered political pledges for healthcare and tax reform – it’s difficult to forecast where market trends may head. But if you’re in your fifties or older, being prepared to weather the effects of market volatility on retirement money is critical.

Here’s a quick look at some insights from various commentators and experts – and why you and other retirement investors may want to consider wealth preservation strategies while the value of your retirement assets is healthy and strong.

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Following the election of Donald Trump as President-Elect, the market has been on the rise. On Tuesday, December 20, 2016, the Dow Jones Industrial Average nearly hit an all-time high. At session-high for the day, the Dow came within 13 points of hitting the 20,000-point benchmark – which would have been a new, all-time growth benchmark for the index.

In fact, with a strong, days-long market rally, the Dow has notched 17 record closes since the election. Other indices also have been on an upward trajectory, for one the S&P 500 set a new closing record on Wednesday, December 7. Financial pundits such as economist Mohamed El-Erian have pointed to growing investor optimism over anticipated Trump-administration economic policies as a growth driver.

For Americans aged 50 and over, all of this is excellent news for retirement portfolio values. But as historical data shows, market growth doesn’t happen in a vacuum or linger on forever. This is a critical point for people nearing retirement – particularly those within five to ten years of it. With life expectancies on the rise, one question is how they will pay for what may be 20-30 years of a retired lifestyle.

Income certainty is an important retirement concern, and older Americans are considering what steps they can take now for financial security. If retirement is in the near future for your household, here are some quick year-end tips to consider for lifelong income certainty, no matter where the market is.

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What Happened to Your Money Lessons from Brexit

Last Friday brought news with truly global implications: British citizens voting to leave the European Union. The results of “Brexit,” or a referendum on whether the United Kingdom should stay a member of the EU, were surprising for many. By a margin of almost 52% to 48%, UK voters signaled their desire for departure.

In response, British Pound Sterling fell over 10% against the U.S. dollar overnight. Since then, the stock market has been in a flurry. To highlight recent market activity, as noted in stories from CNBC, Reuters, and MarketWatch:

  • Brexit and future eco-political possibilities provoked investor panic
  • The CBOE Volatility Index, an index measuring fear in financial markets, rose 49% to 25.76, its highest level since February 2011
  • There was massive investor selloffs, as a result
  • U.S. stocks plunged more than 3% on Friday, leaving the market in the red so far for 2016
  • On Friday, the S&P 500 fell 3.2% -- it lost all its gains in 2016 and its worst decline since August 2015
  • The Dow Jones Industrial Average lost 610 points on Friday, its 8th largest point loss ever
  • With a 4.5% decline on Friday, the NADSAQ was down nearly 6% year-to-date on Friday
  • Financial-sector stocks dropped 5.4%, the worst losses since August 2011 (a trend accentuated by London being a global financial center)

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In a prior article, we discussed the recent stock market downturn. Since then, the stock market has recovered much of what it lost. But the effects still linger from the massive sell-offs, which started in mid-August and persisted through until month-end. Given the extent of their impact, it certainly begs the question of whether stocks are still currently overvalued – and what effects this might have in the future.

The Current Stock Markets Situation

The flurry of global stock sell-offs stemmed from concerns about the Chinese economy and when the Fed might raise interest rates. A strong drop in Chinese manufacturing and the surprising devaluation of the Chinese yuan were primary strong contributors to these global investor fears.

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Just last week, global financial markets were stirring. But this past Monday, August 24, 2015, it reversed. Minutes after Monday’s opening bell, the Dow Jones Industrial Average had a record 1,089-point decline. At closing, it had plummeted 588 points.

Likewise, the S&P 500 index formally entered correction territory. At closing, it had recorded a loss of 77.68 points, or a 3.94% decline. Both closings were the biggest reversal seen since October 2008.

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In past blog posts, among other things we’ve discussed the importance of portfolio diversification. Having too much of your money allocated in volatile markets – such as the stock market – can leave it vulnerable to market downturns. It could lead to sizable retirement losses – an outcome which may take years from which to recover.

In late April to early May, the S&P 500 index was hovering at 2% below its record high. Given this trend, many industry analysts were calling for the possibility of a market correction of 10%. Marc Faber, editor of The Gloom, Doom, and Boom Report, had a less favorable forecast.

“For the last two years, I've been thinking that U.S. stocks are due for a correction. But I always say a bubble is a bubble, and if there's no correction, the market will go up, and one day it will go down, big time,” Faber opined on April 30, 2015 on “Trading Nation” on CNBC. “The market is in a position where it's not just going to be a 10 percent correction. Maybe it first goes up a bit further, but when it comes, it will be 30 percent or 40 percent [at] minimum!”

Why So Bearish?

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