The Markets

Overall, May was a good month for investors.

The adage, “Sell in May and go away,” would have been poor advice last month. Major stock indices in the United States finished the month higher. Connor Smith of Barron’s reported:

• The Nasdaq Composite was up 6.9 percent for May,
• The Standard & Poor’s 500 Index gained 4.8 percent, and
• The Dow Jones Industrial Average finished 2.3 percent higher.

Despite the positive returns, May was also a volatile month for stocks as investors worried about inflation and whether the Federal Reserve will begin to lower rates in 2024, reported Paul La Monica of Barron’s.

For much of last week, stocks trended lower. The Conference Board’s Consumer Confidence Index surprised by exceeding economists’ expectations for May, but it had little effect on investors as the report wasn’t rosy.

Confidence improved “…amid optimism about the labor market, but worries about inflation persisted and many households expected higher interest rates over the next year…The mixed survey…also showed more consumers believed that the economy could slip into recession in the next 12 months,” reported Lucia Mutikani of Reuters.

Late in the week, markets regained lost ground after the Personal Consumption Expenditures Price Index (one of the Federal Reserve’s preferred inflation gauges) data arrived. The Index showed that core inflation, which excludes volatile food and energy prices, ticked lower from March to April. Headline inflation remained steady month to month.

Year to year, headline inflation was 2.7 percent in April and core inflation was 2.8 percent.

Major U.S. stock indices finished the week lower. The yield on the benchmark 10-year U.S. Treasury finished the week close to where it started the week.

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; 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; MarketWatch; djindexes.com; U.S. Treasury; London Bullion Market Association.

Past performance is no guarantee of future results. Indices are unmanaged and cannot be invested into directly. N/A means not applicable.

YOUNGER GENERATIONS ARE FRUSTRATED WITH BABY BOOMERS. The saving and spending habits of baby boomers, born between 1946 and 1964, have been discussed in the news and on social media lately. Much of the discussion has focused on the wealth accumulated by the world’s baby boom generation. Boomers have, broadly speaking, acquired significant wealth over their lifetimes. The Economist reported that baby boomers in the United States comprise “20% of the country’s population, own 52% of its net wealth, worth $76 [trillion].”

Instead of congratulating a group that is likely to live longer in retirement than previous generations have, some conversations accuse boomers of hoarding wealth, while others suggest that policy mistakes by leaders in the cohort have held back younger generations economically.

Whether these discussions reflect the beliefs of younger generations is unclear. Regardless, boomers have solid reasons for spending slowly. These include:

Leaving an inheritance for younger generations. “Many boomers recognize how lucky they are to have accumulated such enormous wealth. They want to pass it on to their children, many of whom are struggling to buy a house or pay school fees… The flow of bequests from the dead to the living, as a share of GDP, is rising fast across the rich world. Americans inherit about 50% more each year than they did each year in the 1980s and 1990s, for instance.”

Living longer in retirement. Longevity risk is a significant concern for baby boomers, many of whom may spend 30 years or more in retirement. According to the Employee Benefits Research Institute’s Retirement Confidence survey, 32 percent of workers and 26 percent of retirees are not confident they will have enough money to live comfortably through retirement.

Keeping a reserve – just in case. British research found that older people who do not believe they will need long-term care are likely to spend their savings more quickly, while those who believe there is a possibility of becoming less mobile or developing dementia are likely to spend more slowly.

Planning for retirement is not a simple task, especially with the possibility of reduced Social Security benefits ahead. A new report from Goldman Sachs found that a majority of millennials and Gen Z are ahead on planning and saving for retirement, while almost half of the Gen X and baby boomer generations are behind.

If you have any questions about retirement or estate planning, please get in touch.

Weekly Focus – Think About It 

“Wealth consists not in having great possessions, but in having few wants.”

―Epictetus, philosopher