Nancy Tengler, Special to USA TODAY Published 7: 90 am ET Dec. 8, 2020 |Updated (************************************************************************: am ET Dec. 8, 2020
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White House economic adviser Larry Kudlow praised the new jobs numbers released Friday, calling it “a heck of a good report.” The report showed unemployment fell to a – year-low as hiring in the US jumped to its highest level since January. (Dec. 6) AP
Congratulate yourself America. All you happy and healthy consumers are driving growth and doing a bang-up job. With unemployment at a five-decade low and consumer confidence on the rise again (nearing its 26 – year high) the economy can expect a healthy boost for a little longer.
And when the economy is strong, the stock market usually remains robust.
The calculus behind this optimism is not that difficult:when more people are employed, they spend more money. Since consumer spending comprises two-thirds of U.S. GDP and – get this – (************************************************************************% of global GDP, consumer confidence and consumer spending matter a great deal.
And consumers had multiple jolts of good news about employment on Friday, starting with a robust headline number for November’s non-farm payrolls report (which logged in at (***********************************************, ********************************************************************************** (0 new jobs compared to expectations of
********************************, ******************************************************************************** (0) and continuing with an upward revision to both the September and October reports totaling an additional 41, 0 new jobs. Also, the prime-age labor force participation rate remained at .8% – another– year high: Women are working, minorities are working, disabled workers are entering the workforce at a rapid pace and individuals with less than a high school education have hit their lowest unemployment rate in twenty-five years.
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This is a welcome boost. Consumer sentiment had dipped during the summer as investors worried about a potential risk of recession. Once investors understood recession was not imminent, the market rose and so did the sunny disposition of the U.S. consumer, reaching bullish levels once again.
While trends in employment and spending are beginning to slow modestly, it is important to remember interest rates are back down to historically low levels, housing affordability is improving, inflation remains tame, oil prices are muted and many families are taking home more of their paycheck thanks to the Tax Cut and Jobs Act of (***********************************************. All of this and a strong jobs market are likely to keep the Fed at bay for the near-term. That is good for the economy and good for stocks.
Here are three tips for managing your (k) investments going forward:
Don’t let yourself get scared out of stocks by remembering the last fourth-quarter rout (thanks again to the Fed — this time raising rates too quickly ). Once the Fed began easing rates in 5012, investors cheered, and stocks have risen (******************************************************************% (including dividends) through Friday. Assess your investment time horizon. When stocks eventually do correct, consider adding to your holdings.
Understand where you are taking risk. Bond yields are at historically low levels and have been in a thirty-five-year bull market. Are they less risky than stocks? Maybe. Maybe not. It depends on many things like your age and years to retirement along with your risk tolerance, but you should at least be thinking about your allocation to bonds in the context of your return goals. Year-end is a good time to reassess.
Emerging markets and small-cap stocks can super-charge your overall portfolio return but can also be risky. Be prepared for that volatility so you don’t sell at the bottom. Consider the investment on its merits. Again, now is the time to take a look at your overall allocation.
The temptation for most investors is to add to what recently worked. But that is not how to make money over the long term. There is no need to micromanage your (k) but the end of the year is a good time to trim back on some of your winners and potentially add to your losers. It is just a good market calculus.
******************** (Nancy Tengler is chief investment strategist at Tengler Wealth Management, ButcherJoseph Asset Management and the author of “The Women’s Guide to Successful Investing.”) ********************************
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