May Newsletter to Clients

Enjoy this month’s edition that features a study about the fear of running out of money, a market review and a client question.

A recent story caught my eye: If there’s one thing Americans fear more than death, it’s outliving their savings. (I would add public speaking to most people’s lists but that’s off the subject.) An annual survey by the Allianz Center for the Future of Retirement found 67% of Americans worry more about running out of money than death.

The study named some quite legitimate reasons for this. People are living longer. Inflation is running high. The cost of health care continues to rise. Social Security faces a shortfall as soon as 2032 unless Congress acts. I would add to that the ubiquitous ads asking, “Is $1 Million enough to enjoy retirement?”

These questions are why we create financial plans for clients. How much will our expenses be in retirement and where will the income come from to cover those expenses? Social Security or possibly a pension will cover some but not all of our expenses. The rest will be covered by what we’ve saved during our working years. Having a plan, and an investment strategy to help implement your plan, can be great peace of mind. 

For those of us still saving the best plan of action is to plan, live beneath our means and save the rest. As a reminder, the IRS personal contribution limits for 2026: 

•    401(k) and 403(b) - $24,500; 
o    For those 50 and up, $32,500;
•    IRAs or Roth IRAs - $7,500. There are income limits so consult with us before contributing to these types of accounts;
o    For those 50 and up, $8,600. 

In a rather volatile investing year so far, April was a good month, bouncing back from a down March. The rebound was driven by the so-called Magnificent 7 group of stocks that include Meta, Alphabet, Amazon, Apple, Microsoft, Nvidia and Tesla. Although inflation continues to edge higher and geopolitical concerns can’t be ignored, earnings for these and other technology companies continue to rise. 

While oil prices don’t have much of an impact on the Mag 7 companies’ ability to earn, they do have an impact on other companies and, as a result, the stock market. The war in Iran has put upward pressure on oil prices the world hasn’t seen in recent years but the United Arab Emirates’ decision to exit OPEC could lead to higher production that might put downward pressure on prices. Regardless, oil will probably continue to dominate the headlines for the foreseeable future. 

April performance:

•    S&P 500 – increase of 10.5% in April;
o    Up 5.7% year-to-date;
•    Russell 2000 Index of small, U.S. stocks – up 12.2% in April;
o    Up 13.2% year-to-date;
•    MSCI EAFE of international companies – Up 7.5% in April;
o    Up 6.1% year-to-date;
•    Bloomberg U.S. Aggregate bond index – Up 0.1% in April;
o    Up 0.1% year-to-date.

One last note, while the S&P 500 index of large, U.S. companies has performed well as a group, 46% of the companies are underperforming the index. In fact, 11% are down more than 20%. As a sector, healthcare is the worst-performing, down 5.3%. 

Recently, longtime clients asked me to opine on a column written by an economist stating the U.S. is certain to enter a recession this year and the stock market will plunge as a result.
 
First, I always get suspicious when someone states that something will happen unequivocally – particularly things as difficult to predict as recessions and market performance. As Jason Zweig of the Wall Street Journal said about market bubbles, “As I’ve warned before, bubblespotting is a lot harder than it seems. If identifying a bubble were easy, then we all could do it. And, if we all could do it, then a bubble wouldn’t form in the first place.”

Owen Lamont, a portfolio manager at Acadian Asset Management has written extensively about market extremes. One definition of a bubble, he jokes, is “when I think the stock market is overpriced and then it doubles.” 

Zweig’s advice? Make sure your portfolio is diversified – hold large, U.S. stocks but also smaller stocks and international companies as well – and rebalance regularly to ensure you’re still following your investment plan. Check and check.

Thank you for your continuing confidence.