Daily Commentary

MarketMinder’s View: Move over, FOMO (fear of missing out)—another fear (FORO, or fear of running out [of money]) is in town. According to several surveys discussed here, many retirees worry about outliving their money. “It’s easy to understand why. Costs are rising in almost every aspect of life, particularly healthcare, which eats up more of a retiree’s budget as they age. On top of that, there’s the worry that Social Security benefits may be cut by 22% in just six years, while healthier Americans may live longer—and face more years of expenses—in retirement. It’s a lot of uncertainty to wrestle with in a spending plan.” Retirees aren’t alone in their dour outlooks. As the article also notes, one report found 75% of US adults feel guilty about “fun” spending. Another found 4 in 10 Americans worry daily about retirement saving. From a human perspective, we feel for those anxious about their finances. Households stateside and abroad have grappled with higher prices for the past several years. It is stressful. However, from an investment perspective, feelings and emotions don’t correlate with action. Folks’ economic outlooks may skew negative because of the nonstop barrage of negative news. But many recognize their own personal situation isn’t dire. That disconnect partially explains the last line here—that nearly 4 in 10 Americans also “often feel hopeful when they think about their finances.” Contradicting takeaways show why surveys aren’t reliable indicators of future activity. We suggest watching what people do, not just what they say. For more, see our September commentary, “Low Vibes Aren’t Keeping America’s Economy Down.”   

MarketMinder’s View: Like the headline here says, the Social Security Administration announced today that its cost-of-living adjustment (COLA) will raise Social Security benefits 3.6% in 2027, which works out to $75 more per month on average. Of course, your mileage may vary. We think this highlights two key points for beneficiaries. First, as the article explains, CPI-W determines the COLA, but that probably doesn’t match your cost of living, which is ultimately what matters most for your personal finances. If your expenses rose less than 3.6% y/y, great! But if not, some budgeting may be in order, particularly for the items your benefits fund. Second, while COLAs help “millions of Americans cover rising everyday costs, including groceries, routine bills and health care,” which we agree is critically important, we also think relying on COLAs alone in retirement isn’t the optimal path. Investing throughout your retirement, in a portfolio whose asset allocation matches your goals, cash flow needs, time horizon and comfort with volatility, can also deliver returns to help you outpace inflation. With foresight, planning and discipline comes greater financial flexibility—and freedom.

MarketMinder’s View: Are sentiment surveys anything to go by? Sensibly, this article dismisses consumer sentiment readings’ hovering near record lows, as “the results have shown a strict red-blue divide as the economic mood of Republicans or Democrats flipped with the occupant of The White House. That makes the headline number all but useless to investors.” We could name a few more reasons these surveys are all but useless to investors, but we tip our hat all the same. But it then pivots to professional investor sentiment: “Luckily, asking professional investors how they feel and what they own still seems to work. Bank of America’s Global Fund Manager Survey, released this week, offers a treasure trove of detail. Like the Michigan survey used to, BofA’s most reliable signals flash when too many respondents seem to be in agreement. ... The percentage of respondents expecting ‘boom’ conditions—above trend growth and inflation—was the highest since Feb. 2022, the starting point for the last bear market.” Meanwhile, “Respondents were the most net overweight tech stocks since the summer of 2020, the height of the feverish post-Covid market rebound.” So does that spell doom for the Tech-led bull market? Not necessarily. For one, 2022’s reading was miles higher than today’s. Two, the gauge actually hit its high in 2021, reminding us it isn’t a timing tool. Three, it also spiked three times during the 2009 – 2020 bull market without signaling a peak. Seems to us there is more noise than signal here. Consider, too, that rote contrarianism—doing the opposite of everyone else—is just as naïve as herd following. Not all optimism is unwarranted. What really matters is the gap between sentiment and reality: What have markets pre-priced 3 to 30 months ahead—and how will earnings likely turn out. Yes, Tech exuberance presents a higher hurdle to clear for upside surprise, though pulled IPOs and funding tremors help reset sentiment lately. But excluding Tech—and outside America—the bar is considerably lower, as false fears like a “disorderly rise in bond yields” reign.