| Thursday's Headlines 1. US markets slide on coronavirus concerns 2. Huawei indicted for racketeering 3. Federal judges halt Pentagon cloud contract 4. Investors are feeling anxious...wonder why? Markets Closed
 Markets Today U.S. markets backed off of record highs today and closed in the red for the first time in five days. Investors were concerned about the spike in new coronavirus cases. While the rise was due to broadened diagnostic criteria, it flies in the face of health agency hopes that the number of new cases was on the decline.
After rising yesterday amid hopes that new coronavirus cases were tapering off, United and American Airlines both fell more than 1% each. Wynn Resorts and Las Vegas Sands declined by more than 2% each. Until the virus is officially contained, stocks with the most exposure to China, and the coronavirus, will continue to be impacted.
Earnings season is winding down, but we did get results from PepsiCo, Alibaba, and Applied Materials, which all beat expectations. Applied Materials shares gained 4.7%, but PepsiCo and Alibaba both fell in today's session. Headlines:
 chart courtesy of BCG
High Anxiety Investors are fearful. If we needed more evidence of that, we got it in the form of a survey of investors that the Boston Consulting Group released this week. What's interesting is that the same survey conducted at the end of 2018 revealed nearly the exact same results. One year later, nearly one third of the investors surveyed have a bearish, or very bearish outlook for the stock market looking three years out. Just over one third are very bullish. Remember that 2018 ended with a steep stock market correction, and 2019 ended with the S&P 500 rising nearly 30% for the year.
Survey respondents' expectations for average annual total returns over the next three years are just 5.6%. That's markedly lower than the 10.1% annual average total return since 1926. Total return is price increases plus dividends.
What is driving these low expectations among investors? High valuation multiples remain the number-one source of concern, according to the survey. Among all respondents, 73% believe that markets are overvalued, an uptick from 67% in the 2018 survey (see chart above). But the perceived downside appears to be limited: on average, investors viewed markets as being overvalued by 10%, an improvement from the average of 15% in the previous survey. That's even more peculiar given the hearty gains in the market over 2019, but investors are peculiar.
One final note, 71% of respondents anticipate a recession within the next two years, compared with 74% in the 2018 survey. And although 46% of those expect the anticipated recession to last more than one year, 74% expect it to be mild (less than a 2% contraction in real GDP) even if it is prolonged.  chart courtesy of Fidelity Investments
401(k) Millionaires Hit Record Highs Who wants to be a millionaire? Well, tens of thousands of new people with defined-contribution retirement plans joined the club in 2019, according to a recent survey by Fidelity Investments.
According to the survey, the number of people with $1 million or more in their 401(k) increased to a record 233,000, up from 200,000 in Q3 2019 and 21,000 in Q4 2009. The number of IRA millionaires increased to 208,000, also a record high and an increase from 182,400 last quarter.
The average 401(k) balance rose to $112,300, a new record high and a 7% increase from last quarter's balance of $105,200. The year-over-year average balance increased 17% from $95,600 in Q4 2018; the average IRA balance also rose to a record $115,400, a 5% increase from last quarter and 17% higher than the $98,400 balance one year ago. The average 403(b)/tax exempt account balance increased to $93,100, up 6% from last quarter and an increase of 18% from Q4 2018.
You can thank the rise in the stock market for minting a lot of these new millionaires, but it is also worth pointing out that you have to invest the money in your retirement plan to make it work for you. Many U.S. workers with access to a 401(k), IRA, SEP, or 403(b) plan fund their plans, but do not allocate their investments to give themselves the best shot at growing and compounding their wealth.
Get involved and get invested.
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(chart courtesy YCHARTS)  Software company Pegasystems flew today after it reported earnings and an analyst from Rosenblatt Securities maintained a buy rating on stock. Electric-car manufacturer, Tesla, rose today after releasing a whole raft of news. For more, see above.  Nu Skin fell after they reported disappointing earnings and low sales guidance for the upcoming year, which they blamed on damage done to their business by the coronavirus. Processed-food maker Kraft Heinz fell after it reported disappointing sales numbers due to declining demand for processed food. Word of the Day A defined-contribution (DC) plan is a retirement plan that's typically tax-deferred, like a 401(k) or a 403(b), in which employees contribute a fixed amount or a percentage of their paychecks to an account that is intended to fund their retirements. The sponsor company will, at times match a portion of employee contributions as an added benefit. These plans place restrictions that control when and how each employee can withdraw from these accounts without penalties.  Today in History February 13, 1970 Today in 1970, Joseph L. Searles III became the first black floor trader on the New York Stock Exchange (NYSE). Searles had played football for the New York Giants after graduating from law school at George Washington University. In 1967, he left football to work as an aide to New York City Mayor John Lindsay, and became Chairman and Director of the New York Mortgage Agency, which provides low-interest mortgages to low-and-middle-income first-time homebuyers. Just a year after his debut on the floor, the NYSE admitted its first black-owned firm, Daniels & Bell, which helped underwrite securities issued by minority-owned businesses. Searles would go on to work for Manufacturers Hanover Trust, a major bank, and then at investment firm Newburger Loeb, and Co. He also worked as a deputy commissioner at the New York Economic Development Administration and as the first chairman of the 125th Business Improvement District in Harlem.
Source: https://atlantablackstar.com/2015/07/12/financier-joseph-l-searles-iii-impact-urban-finance-post-sixties-america/
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Thursday, February 13, 2020
Muted Expectations
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