Markets closed out a third week of gains, putting the Dow at a two-month high and erasing much of the year’s losses. Higher oil prices and an upbeat February jobs report contributed to the rally.1 For the week, the S&P 500 increased 2.67%, the Dow added 2.20%, and the NASDAQ grew 2.76%.2
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Investors cheered at a reasonably solid jobs report. The February Employment Situation report showed that the economy gained 242,000 new jobs last month. That’s the 65th straight month of job increases, and the trend shows that the labor market continues to improve.3 The headline unemployment rate remained unchanged at 4.9%; however, the labor force participation rate rose slightly to 62.9% as a greater percentage of Americans joined the labor market by working or actively looking for jobs.4 A declining participation rate had worried economists, and an uptick could indicate that discouraged workers are returning to the search.
The report showed that the biggest job gains were in healthcare, retail, and hospitality. The construction industry also added thousands of new jobs, which is a sign that builders expect economic demand to pick up in the coming months. Unsurprisingly, the mining sector was the biggest job loser.5
However, the news wasn’t all rosy.
Digging deeper into the data, we also see that wages slipped last month. Average hourly wages are up just 2.2% from 12 months ago, slower than the 2.5% rate we have seen recently and well below target rates of 3-4%. Though the decline might be a seasonal issue or involve data technicalities, it could be a sign that jobs growth isn’t being reflected in wages. It could also mean that employers are offering incentives like benefits or vacation time that aren’t reflected in income.6
Overall, the report is a mixed bag for the Federal Reserve, though the data shows that there isn’t a slowdown in the labor market and will help tamp down fears of a recession. Is a March interest rate hike in play? Realistically, the data probably isn’t solid enough for the Fed, which is looking for positive economic data to counterbalance global concerns and the recent market declines. Current bets on the next hike are all over the place. Some economists believe an April or June hike is likely while some futures traders are placing bets on a November hike.7
This week’s economic calendar is thin, highlighted by trade data on Friday and a speech by Federal Reserve Vice President Stanley Fischer. Though the Fed isn’t likely to raise rates at next month’s meeting, Fischer may give some insight into the timing of the next rate hike. Most attention will be on presidential debates, caucuses, and the primary race.8
Not your Father’s retirement
The GPS Method is essentially like getting the big picture view from 30,000 feet so that you can obtain a clear overview of where you’re going, and then plot a more detailed, step-by-step course on how to get yourself there. This can entail assessing your investments, evaluating downsizing, seeking other potential sources of income, and even knowing when it may be time to sell various assets. But without this type of planning, having just basic ideas of retirement are abstract. Once you make an actual plan, though, you will be much more assured of moving forward – and you’ll also have the confidence that you can get there.
How to Get There from Here – GPS Analogy
Have you ever planned a 2-week long vacation to a place that was far away, but yet not looked at a map before you got in the car and started driving? Doubtful. It just simply wouldn’t make any sense. How would you know where you were going – in fact, how would you even know which direction to start out?
Now, what about planning a 20 or 30-year long vacation without first looking at a map of where you were going? Sounds pretty silly doesn’t it? But the reality is that many people “plan” for their retirement that way. Sure, they may be saving money for the future – and they may even be setting aside a sizable chunk in their employer-sponsored retirement plan, in an IRA account, and/or in personal savings and investments. But if you don’t have a clear cut direction for where you want to end up, then how do you know if your investments are performing like they’re supposed to be – in fact, how do you know if you’re even invested in the right financial vehicles for you at all? The answer is that without a clear cut plan in place – you don’t.
Planning for the Destination
The beauty of creating your own roadmap is that no two journeys are exactly alike. The GPS Method isn’t a “cookie cutter” approach. Because retirement is such a unique journey for everyone, with this approach, you can decide where you want to go and how you want your future to look. Then, once you’ve determined your ultimate destination, the GPS Method will help you in creating a plan that will get you there.
Think about your retirement, and then ask yourself these questions:
- Where would you like to live?
- How will you spend your day?
- Will you travel?
- Will you have a second home?
- What goals would you like to accomplish?
- Do you plan to work part-time or volunteer?
- Will anyone else depend on you for income or support?
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