Big declines in the stock market are associated with recessions, and stocks often bottom months before recession-end. No one knows exactly how long the downturn in the economy will last or precisely how much the economy will shrink – or even if it will shrink. However, one thing we do know is that recessions come and recessions go. And, when they go, the stock market has always headed higher. The stock market, as measured by the Standard & ..

Why is financial planning important? Mat discusses this and more in episode 57...

The Federal Reserve System, the nations central bank, has a dual mandate to pursue maximum employment and maintain price stability...

The pace of job creation is still strong, and the unemployment rate remains near its all-time low, despite aggressive Federal Reserve rate hikes to slow the economy and stop inflation. But the latest economic data offers a blurry picture of whether there will be a recession, how long it will last and how deep it will be. The U.S. government responded to the Covid-19 pandemic with about $10 trillion in stimulus payments to individuals and business..

Let's talk about stock market volatility because we have seen some extraordinary volatility lately.  Let’s start by recalling the basic axiom of investing in common stocks: If you want the so-called equity risk premium, then you should expect stock market volatility and, in fact, welcome it. It’s completely counterintuitive. Without volatility, you wouldn't get the excess return over fixed-income on common stocks. Yes, we've entered a pe..

Executive Summary: Pension discount rates continue to move higher, expanding funding ratios to improved levels and offering an opportunity to stabilize future financial requirements through a hedging strategy such as ALIS. Capital markets have exhibited one of the worst 9-month performance periods in history as measured on a year-to-date basis through the third quarter. The FOMC will continue to aggressively force inflation out of the economy cau..

Housing starts have dropped from the peak rate of 1.8 million in April 2022 to 1.4 million in September, the nation is not experiencing the collapse in starts of new single-family homes. The current rate of housing starts remains much higher than experienced during most of the last economic expansion cycle, which ended with the Covid recession in April 2020. Multiple academic studies estimate the U.S. needs to build about 1.5 million new single-f..

Stocks have been in a bear market since June 13...

Stocks have been in a bear market since June 13, 2022. The decline began on January 3rd, worsened in February when Russia invaded Ukraine, and sunk further after the Federal Reserve in March began an aggressive series of interest rate hikes to fight inflation. The price of the Standard & Poor’s 500 index and historic financial crises since 1957, shown in black in the chart, is a reminder that the U.S. economy and stock market endured many s..

History will record the post-Covid period were living through right now as a painful time in U.S. financial history...

Stocks rose sharply Friday and for the week. Stock values have come down since Russia invaded Ukraine, and the price of the Standard & Poor’s 500 is now in line with its long-term compound annual growth rate of 7%. This indicates stocks are not overpriced like they were in the tech-stock bubble, which began in 1997 and peaked in 1999 and 2000, when the S&P 500 was out of line with the average annual 7% long-term growth trend. Currently,..

The Federal Reserve System, the nation’s central bank has a dual mandate to pursue maximum employment and maintain price stability. These two priorities are currently treated equally, but this was not always the case. In fact, the Fed’s bias toward maximum employment in the late 1960s and 1970s was a critical driver of the Great Inflation.  Recognizing the need to balance price stability and maximum employment, in 1977, Congress amended ..

Waiting for a Pivot Strategy The Fed has been very clear that it intends to raise rates aggressively until there are clear signs of falling inflation.  There have been 300 basis points of rate increases in the last five FOMC meetings with another 125 basis points expected before the end of the year.  The result of this has been a significant decline in the stock market, rising interest rates, and an expectation of a recession in 2023.  Monetar..

The third quarter of 2022 has been generally unpleasant for investors and the Fed alike.  The plan to allow the economy to “run hot” while the transitory nature of inflation played out caused inflation expectations to become “baked” into economic decision-making.  To combat inflation, the Fed continued its aggressive policy path of moving away from an accommodative stance to becoming restrictive.  By some measures, the combination of F..

The post Covid-19 era has triggered an annual inflation rate of +8.2%. High inflation has forced the Federal Reserve to hike interest rates sharply in recent months to slow economic activity.  Since closing at an all-time high on January 3, the Standard & Poor’s 500 stock index has plunged in value by -25.3%. Amid the decline in stocks, as the economy hurtles toward recession, here’s important historical perspective.   ..

As the bear market grinds on and portfolio statements are a little frightening to look at, it can make you wonder if stocks are worth the risk?..

The Standard & Poor’s 500 stock index fell into a bear market on June 13, 2022, rebounded in the summer, and then tanked again as summer ended; autumn is beginning with the fall continuing. This morning’s higher than expected inflation number may make you wonder when the post-Covid financial pain will stop.  Using history as a guide, the bad news is probably not all behind us but it’s also not so far from ending, according to finan..

With stocks in a bear market and the economic outlook shaky, here are some lessons from the last bad bear market...

Mat discusses what to do regarding market volatility and your retirement...

The equity risk premium, a concept in modern financial theory illustrated here, quantifies the premium stocks annually averaged in the 20 years ended September 31, 2022. Stocks, as measured by the Standard & Poor’s 500, averaged a +9.8% annual return in the last 20 years — more than seven times the +1.2% annual return on the risk-free 90-day U.S Treasury bill in the same 20-year period.  T-bills are considered a riskless investment. ..