Market Volatility's Effect on Retirement Planning
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What is the main topic discussed in this episode?
Your Money Briefing. Money and market stories from The Wall Street Journal. I'm J.R. Whalen in New York. How are those with a sharp eye and planning for retirement handling the current market volatility? We'll have some answers in a moment, but first, these money items you should know. The Wall Street Journal Money Beat team says natural gas, a historically turbulent market that's crushed experienced traders and large hedge funds, is having its quietest period in 22 years. The volatility of the past couple of years in energy has disappeared, suggesting an end to the turbulence brought on by a global supply glut.
How does current market volatility affect people planning for retirement?
In natural gas, which has been prone to severe swings, three-month realized volatility is at its lowest since 1996. And volatility in U.S. crude futures also reached its lowest since late 2014. Meanwhile, the Journal Markets team says despite the recent pullback in tech stocks, investors are not ready to break up with the market's technology darlings. Stock ratings among analysts and brokerages have largely held steady for big tech firms, even as their shares have slumped. A sign the tidal wave of bad news hitting the industry hasn't destroyed confidence in popular stocks. Analysts cite big tech's strong earnings outlook and dominance across industries, from retail to social media, as well as the likelihood that any additional regulations lawmakers impose could
will take time to implement.
What quick market headlines should investors know before the interview?
And the Journal's Heard on the Street team says after strong corporate earnings results in the first quarter of 2018, investors should expect a string of disappointments and as such keep an eye on their portfolios. Analysts polled by Thomson Reuters estimate first quarter profits for companies in the S&P 500 will be up an estimated 18.5% above the year-earlier level. But while earnings will still get a boost later in the year from some effects of the tax cut, there are too many variables, including more capital spending, higher labor costs, a weaker economy, or trade war, to bank on double-digit growth for the whole year. This is your Money Briefing from The Wall Street Journal. Welcome back, everybody.
And he joins us to discuss. So, Joe, Wells Fargo and Gallup recently polled investors. And I suppose the conventional wisdom would seem to be that investors and those planning for retirement would be unsettled by the volatility we've seen in the market. But that really hasn't had as much of a pronounced effect.
That's right, JR. It has not borne out. In fact, the index in and of itself is at an all-time 17-year high. That's in September of 2000, right before the dot-com sort of bubble, if you will. And what we find is 7 out of 10 investors, when we talked to them, said that they're very confident about maintaining their household income and achieving their investment objectives over the next five years. So there's still a lot of optimism in the market.
I thought it was interesting in the survey that more than half of those surveyed said they could tolerate a 10% or greater market correction over the course of a year. And they seem to be... It's almost like a new brave new world that they can weather that sort of tumultuous environment in the market.
Right. In fact, I referred to this as the new normal, which is the correction tolerance, if you will. And to your point, over half have said they could not only tolerate a correction at 10% or more, but the interesting part, 45%, when we asked about volatility, said they're concerned about volatility. But that's actually down from 64% just a year ago. So optimism continues to pour. And to add to that, JR, 6 out of 10 say right now it's a good time to invest broadly in the financial markets. And more specifically, 5 out of 10 said it's a good time to invest in stocks. So they're very positive about the overall projection market going forward.
Financial people I talk to that have been in the market and observing the market for decades say they have not seen an environment where stocks are such an attractive destination for money.
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