A Key to a Lasting Retirement Portfolio

Posted on February 27, 2015 | AAII Journal

If you’re retired—or nearing it—ensuring that your retirement investment portfolio lasts your lifetime is critical. And that’s not easy because by nature the stock market is volatile. What if a market downturn takes a bite out of your investment portfolio?

While you cannot completely control the market’s impact on your portfolio, there are things you can control that can also make a significant difference in how long your portfolio may last. One: your withdrawal rate from your portfolio. The amount you take can directly impact how long your assets could last in retirement.

But what about in difficult markets? At Fidelity, we still believe in inflation-adjusted withdrawal rates of no more than 4% to 5% a year for individuals who retire at age 65. That’s because we did the analysis using our Retirement Income Planner and an inflation-adjusted withdrawal rate of more than 5% steeply increased the risk of depleting retirement savings during an investor’s lifetime. We also ran some further analysis to determine the influence of different market environments.

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Discomfort with Current Stock Valuations

Posted on February 26, 2015 | AAII Survey

This week’s Sentiment Survey special question asked AAII members about their comfort level with current stock valuations. Just under half of all respondents said stocks are either overvalued (33%) or somewhat/slightly overvalued (14%). Many who thought stocks were expensive described current valuations as being high relative to historical valuations. At the other end of the spectrum, 17% of respondents said they were either comfortable with current valuations or view them as being acceptable. Several of these respondents pointed to profit growth as the reason why. Slightly more than 10% said stocks are undervalued, while 5% said the answer depends on the industry or the stock being analyzed.

A common theme across answers was a lack of good alternatives for investment dollars. Several respondents thought stocks could continue to rise so long as interest rates stay low or profits continue to grow.

Here is a sampling of the responses:

  • “I think valuations are high, but they may stay that way for a considerable time.”
  • “Not very comfortable as the price-earnings ratio seems pretty high, but there is no other game in town besides equities.”
  • “Some stocks are getting too high; need to be selective and not buy the ‘market.’”
  •  “Stocks are undervalued due to the level of profits.”
  • “I’m fairly comfortable at current valuations as I think prices reflect trends in revenues and earnings.”
  • “The Shiller CAPE ratio is extremely high.”


AAII Sentiment Survey: Optimism Moderates, Remains Above Average

Posted on February 26, 2015 | AAII Survey

The percentage of individual investors describing their short-term outlooks for stock prices as either bullish or neutral moderated in the latest AAII Sentiment Survey. Pessimism rebounded, but remained at a low level.

Bullish sentiment, expectations that stock prices will rise over the next six months, declined 1.6 percentage points to 45.4%. Even with the pullback, this is the 25th out of the last 29 weeks that optimism is above its historical average of 39.0%.

Neutral sentiment, expectations that stock prices will stay essentially unchanged over the next six months, declined 0.8 percentage points to 34.3%. This week is the eighth consecutive week with neutral sentiment above its historical average of 30.5%.

Bearish sentiment, expectations that stock prices will fall over the next six months, reversed last week’s drop by rebounding 2.4 percentage points to 20.3%. Pessimism is right on the edge of what we consider to be an unusually low level. The historical average for bearish sentiment is 30.5%.

Although the major indexes rose for several consecutive days, bullish and neutral sentiment pulled back after recently setting near-term highs. As noted above, both measures continue to remain above their respective historical averages.

Keeping AAII members encouraged are the upward momentum of stock prices, comparatively low energy prices, earnings growth and sustained economic expansion. Causing other members to be cautious or pessimistic are prevailing valuations, disappointing earnings or guidance from certain companies, geopolitical events, the impact of lower oil prices on energy stocks, the pace of economic growth and worries that an even larger decline in stock prices could occur.

This week’s AAII Sentiment Survey results:

  • Bullish: 45.4%, down 1.6 percentage points
  • Neutral: 34.3%, down 0.8 percentage points
  • Bearish: 20.3%, up 2.4 percentage points

Historical averages:

  • Bullish: 39.0%
  • Neutral: 30.5%
  • Bearish: 30.5%

The AAII Sentiment Survey has been conducted weekly since July 1987 and asks AAII members whether they think stock prices will rise, remain essentially flat or fall over the next six months. The survey period runs from Thursday (12:01 a.m.) to Wednesday (11:59 p.m.). The survey and its results are available online at: http://www.aaii.com/sentimentsurvey.



Sell OF THE WEEK 2/25/2015

Posted on February 25, 2015 | Podcast

AAII Journal Editor Charles Rotblut explains to Chuck Jaffe of MarketWatch why Diageo plc (DEO) is his “Sell of the Week” on the MoneyLife Radio Program. MoneyLife is a daily personal finance show that sorts through the financial clutter to bring you the information you need to lead the MoneyLife.

Audio url: Sell of the week





BUY OF THE WEEK 2/24/2015

Posted on February 24, 2015 | Podcast

AAII Journal Editor Charles Rotblut explains to Chuck Jaffe of MarketWatch why DR Horton (DHI) is his “Buy of the Week” on the MoneyLife Radio Program. MoneyLife is a daily personal finance show that sorts through the financial clutter to bring you the information you need to lead the MoneyLife.

Audio url: Buy of the week




Why Are Utility Stocks Powering Down?

Posted on February 20, 2015 | Dividend Investing

We cannot always identify a reason why a particular stock’s price has risen or fallen over a short-term period, but at times we do see patterns.

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Short-Term Uncertainties and Long-Term Trends

Posted on February 20, 2015 | Stock Superstars Report

We’ve been noticing the price volatility in airline stocks recently and believe it is related to the volatility of oil prices. As you know, fuel prices have a significant effect on an airline company’s profitability. In economic speak, fuel prices are known as an input.

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Greek Economy Having Little Impact on Investor Attitudes

Posted on February 19, 2015 | AAII Survey

This week’s Sentiment Survey special question asked AAII members about how Greece’s attempts to renegotiate its debt are influencing their short-term outlook for U.S. stocks. More than two-thirds of respondents (69%) said the Greek situation is not influencing their outlook. About one out of every five respondents overall (21%) said the Greek economy is too small in terms of its global economic influence to have a lasting impact on the U.S. markets. An additional 12% of all respondents think an agreement between the European Union and the new Greek leaders will be reached.

Nearly 18% of respondents said the situation with Greece is negatively influencing their outlooks. Many of these members said they are avoiding European stocks because of the uncertainty or view the situation as being bad for the European Union.

Here is a sampling of the responses:

  • “Greece is a small economy and won’t drag down the European Union. Any impact on the U.S. market will be short-lived.”
  • “I’m sure the European Union will find a way to compromise with Greece.”
  • “The instability of Europe, including the Greek renegotiations, is one significant factor influencing my outlook.”
  • “The unresolved issue makes me leery of both eastern and western European stocks.”
  • “Not at all. Greece is a neverending saga of financial mismanagement.”


AAII Sentiment Survey: Optimism Surges to Second-Highest Level of 2015

Posted on February 19, 2015 | AAII Survey

Individual investor optimism about the short-term direction of stock prices is at its highest level since the start of the year, according to the latest AAII Sentiment Survey. Pessimism, meanwhile, is at a three-month low.

Bullish sentiment, expectations that stock prices will rise over the next six months, jumped 7.0 percentage points to 47.0%. This is the largest amount of optimism since January 1, 2015 (51.7%). The historical average is 39.0%.

Neutral sentiment, expectations that stock prices will stay essentially unchanged over the next six months, fell 4.6 percentage points to 35.1%. The decline comes a week after what had been the highest reading since July 24, 2014 (40.4%). Nonetheless, neutral sentiment remains above its historical average of 30.5% for the seventh consecutive week.

Bearish sentiment, expectations that stock prices will fall over the next six months, declined 2.4 percentage points to 17.9%. Pessimism was last lower on November 6, 2014 (15.1%). The historical average for bearish sentiment is 30.5%.

As the S&P 500 has rebounded off of its late January lows, we’ve seen a shift in individual investors’ short-term outlooks. Bullish sentiment is up by a cumulative 11.5 percentage points over the past two weeks, while bearish sentiment is down by cumulative 14.5 percentage points. Pessimism is now at an unusually low level (more than one standard deviation below its historical average).

Keeping AAII members encouraged, in addition to the upward momentum of stock prices, are comparatively low energy prices, earnings growth and sustained economic expansion. Causing other members to be cautious or pessimistic are disappointing earnings or guidance from certain companies, geopolitical events, the impact of lower oil prices on energy stocks, a sense that prevailing valuations for stocks are too high, the pace of economic growth and worries that an even larger decline in stock prices could occur.

This week’s AAII Sentiment Survey results:

  • Bullish: 47.0%, up 7.0 percentage points
  • Neutral: 35.1%, down 4.6 percentage points
  • Bearish: 17.9%, down 2.4 percentage points

Historical averages:

  • Bullish: 39.0%
  • Neutral: 30.5%
  • Bearish: 30.5%

The AAII Sentiment Survey has been conducted weekly since July 1987 and asks AAII members whether they think stock prices will rise, remain essentially flat or fall over the next six months. The survey period runs from Thursday (12:01 a.m.) to Wednesday (11:59 p.m.). The survey and its results are available online at: http://www.aaii.com/sentimentsurvey.



Sell OF THE WEEK 2/18/2015

Posted on February 18, 2015 | Podcast

AAII Journal Editor Charles Rotblut explains to Chuck Jaffe of MarketWatch why Gartner (IT) is his “Sell of the Week” on the MoneyLife Radio Program. MoneyLife is a daily personal finance show that sorts through the financial clutter to bring you the information you need to lead the MoneyLife.

Audio url: Sell of the week





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