Happy Birthday, stranger! –When your parents remind you to call them on their birthdays, this is probably NOT WHAT THEY MEAN. New Jersey dad Chris Ferry has been awash in texts and voicemails from people wishing him a happy 62nd birthday because his prankster sons decided to buy an entire billboard near Atlantic City with his face on it. His sons have always tried to do fun, joking things for their dad, and it’s going to be hard to top this.
Keeping a Good Secret- Remember the record-setting $1.5 billion Mega Millions jackpot that was drawn last year? An anonymous woman in South Carolina has stepped forward to claim it, and she is already doing a ton of good with her new fortune. According to her lawyer (the winner isn’t going public, and can you blame her?), she is donating a portion of her earnings to charities including the Alabama Red Cross, which is helping survivors after this month’s deadly tornadoes. Her lawyer said the winner feels “such good fortune carries a tremendous social responsibility.”
Who’d Have Thunk It? – We’ve all bought clothes that come with a tiny bag that has an extra patch of fabric inside. For most people, their first instinct is to think that it’s there in case the shirt or pants get a rip. With a little extra fabric, you could just sew up the hole. But that’s not why clothes come with extra fabric. Think about it, unless you’re a professional seamstress, it would be obvious that you patched a hole. Instead, that extra fabric is so you can test out washing the material a certain way to know if it’ll shrink or the colors will bleed. After all, you don’t want to wash a new shirt without knowing how it’ll react in the machine. With the extra fabric, you can test it out ahead of time. Neat, huh?
Weekly Focus – Think About It
“There are risks and costs to action. But they are far less than the long range risks of comfortable inaction.”
–John F. Kennedy, 35th President of the United States
Stock and bond markets rallied.
Last week, major U.S. stock indices finished higher for the 10th time in 12 weeks. Bond markets moved higher, too, with the yield on 10-year Treasuries dropping just below 2.6 percent, reported Randall Forsyth of Barron’s. Yields on 10-year Treasuries haven’t been this low since January 2018.
The simultaneous rallies are curious because improving share prices are often an indication of a strong or strengthening economy. Improving bond prices tend to be a sign of weakening economic growth, reported Michael Santoli of CNBC.
Why are U.S. stock and bond markets telling different stories?
It may have something to do with investor uncertainty. A lot of important issues remain unsettled. The British government appears incapable of resolving Brexit issues, the United States and China have not yet reached a trade agreement, and recent economic reports have caused investors to take a hard look at the U.S. economy.
Barron’s pointed out investors appear to be hedging their bets by favoring in utilities and other stocks that have bond-like characteristics and participate in the stock market’s gains. An investment strategist cited by Barron’s explained:
“The strength in utilities reflects the attitude of investors who ‘don’t really buy the rally’…While they’re skittish, they still want to participate in the stock market rally but opt for its most conservative sector.”
We’ve seen this before with stocks and bonds, according to a financial strategist cited by Patti Domm of CNBC. “It’s a little bit of a funky correlation. We’ve had both things rallying, which is strange. This is what happened in 2017, when all asset classes did well. In 2018, nothing did well…I would suspect it goes away soon.”
Times like these illustrate the importance of having a well-diversified portfolio.
Gen Xers and Millennials: what are your priorities? The 2018 Insights on Wealth and Worth survey provided some startling information about the priorities of high net worth (HNW) investors. More than one-half (54 percent) indicated long-term capital appreciation was a higher priority than income generation. The other 46 percent were looking for steady income.
Let’s look at the percentages by age group:
- Millennials: 56 percent capital appreciation / 44 percent steady income
- Gen X: 56 percent capital appreciation / 44 percent steady income
- Baby Boomers: 56 percent capital appreciation / 44 percent steady income
- Silent Generation: 46 percent capital appreciation / 54 percent steady income
Millennials (ages 21 to 37), Gen Xers (ages 38 to 53), and Baby Boomers (ages 54 to 72) prioritize steady long-term income to the same extent.
Older investors, who are near or are in retirement, tend to emphasize steady long-term income because they need to maintain their standard of living in retirement. However, one of the advantages of youth is these investors have the time and flexibility to take on higher levels of risk and recover from any market downturns. In other words, younger investors prioritize capital appreciation (i.e., growth) while older investors prioritize income.
It’s important for younger investors to consider their life goals and how their finances may support the pursuit of those goals.
John Klevens, CFP
Sources: The Week Magazine, CNN.com and Livestly.com
Portions of this newsletter has been prepared by Peak Advisor