Market Update: March 17, 2020


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Last week was one for the history books.

Mid-week, the World Health Organization (WHO) declared coronavirus a global pandemic. At the time, there were more than 118,000 cases in 114 countries, and the death toll exceeded 4,000 people. On Friday, the Centers for Disease Control (CDC) reported 46 states and the District of Columbia have been affected, so far. As of Friday, there have been 1,629 confirmed and presumptive cases and 41
deaths.

As the need for containment became clear, daily life underwent rapid change. Major gatherings, from sporting events to Broadway shows to industry conferences, were canceled. Travel was restricted. Schools closed or moved to online classes. Restaurants and bars began serving fewer customers. Many Americans began working remotely or, in some cases, not working at all.

Uncertainty about the economic impact of the virus contributed to stock market volatility. Major American stock indices dropped into a bear market territory, last week. Bear markets occur when prices drop by 20 percent or more from recent highs. Peter Wells of Financial Times reported:

“…a combination of fears stemming from the coronavirus pandemic, oil price plunge, and a global recession killed off an 11-year bull market. Wall Street’s equities benchmark plunged 9.5 percent on Thursday, its biggest one-day drop since Black Monday in October 1987 and also its fifth-biggest one-day drop since 1928.”

On Friday, President Trump declared the coronavirus a national emergency. Reshma Kapadia of Barron’s reported the declaration freed up $50 billion to support local, state, and federal efforts. It also “…grants new authorities to the Health and Human Services department, and gives doctors and hospitals greater flexibility to respond to the virus and care for patients…”

All three major U.S. stock indices rallied after the national emergency declaration, but it wasn’t enough to recover losses from earlier in the week. Chuck Mikolajczak of Reuters reported:

“The indexes were still about 20 percent below record highs hit in mid-February, and each saw declines of at least 8 percent for the week. Since hitting the highs, markets have been besieged with big swings in the market, nearly matching as many days with declines of at least 1 percent as all of 2019. Friday’s surge was the biggest one-day percentage gain for the S&P 500 since October
28, 2008.”

On Saturday, the House passed a bipartisan economic stimulus and relief bill to provide support while the coronavirus is being contained. It is expected to pass the Senate next week, reported Erica Werner, Mike DeBonis, Paul Kane, and Jeff Stein of The Washington Post. The current legislation is separate from the $8.3 billion emergency spending bill passed two weeks ago.

The CBOE Volatility Index (VIX), which is known as Wall Street’s fear gauge, traded above 50 every day last week. At the start of the year, the VIX was trading at 12.47, and it has averaged 22.05 during 2020 to date, reported Macrotrends. A high VIX reading indicates traders anticipate markets will remain volatile.

Recent bouts of volatility appear to have been caused by institutional trading rather than individual investors. Abby Schultz of Penta reported:

“…individual investors are largely sitting tight, according to survey data from Spectrem Group in Chicago. About three-quarters of investors with $100,000 to $25 million in investable assets who were surveyed between Wednesday, March 4…and Monday, March 9 … did not change their investment portfolios at all in light of the market sell-off…Among those with $5 million to $10 million in investable assets, as well as those with $10 million to $15 million, 31 percent bought stocks in the last 20 days…Among those with $15 million to $25 million, 39 percent bought stocks…”


“There’s no place like home.”1

Conjuring an image of ‘home’ was a lot easier for Dorothy than it is for people who are on the cusp of retirement. After all, isn’t retirement supposed to be a new start? Aren’t retirees supposed to wave goodbye to friends and family as they head for new adventures in warmer climates? Shouldn’t the latter decades of life be spent traveling in golf carts down palm-lined streets and tipping umbrella-studded cocktails?

 

While southern migration has played a role in many retirements, the Milken Institute suggests today’s retirees may be seeking a different type of retirement experience. “They are launching companies and nonprofits, climbing mountains, creating apps, and mentoring youth. They increasingly seek lifelong engagement and purpose.”2

Often, older Americans are finding these experiences close to their hometowns. While many retirees move, most – 60 percent on average – land within 20 miles of their previous homes. They tend to remain close to family and friends and age in familiar communities. Just one-fifth move more than 200 miles away, according to the Center for Retirement Research at Boston College.3

Those who settle farther from home may choose their destinations because they offer engaging programs and valued amenities. In its 2017 report on the Best Cities for Successful Aging, the Milken Institute pointed out, “Longevity is linked to location.”2

It’s not too surprising to learn a wealth of factors, including education, income, access to health care, food choices, smoking rates, exercise, the safety of housing, and pollution, affect life expectancy and quality of life. However, the cities that provide the best environments for aging in place may be unexpected.

For 2017, the report identified these large cities as the best for aging in place:2

  1. Provo-Orem, Utah
    • Top traits: General livability, wellness, and education
    • Areas for improvement: Affordability and health and wellness

2. Madison, Wisconsin

    • Top traits: Community engagement and wellness
    • Areas for improvement: Employment and living arrangements

3. Durham-Chapel Hill, North Carolina

    • Top traits: Healthcare, education, and financial security
    • Areas for improvement: Safety and resources and unhealthy trends

4. Salt Lake City, Utah

    • Top traits: Healthcare, education, and financial security
    • Areas for improvement: Quality of life obstacles

5. Des Moines-West Des Moines, Iowa

    • Top traits: Financial security, healthcare, and employment
    • Areas for improvement: Wellness, transportation, and convenience

The top five list for smaller cities includes:2

  1. Iowa City, Iowa
    • Top traits: Healthcare, education, transportation, and convenience
    • Areas for improvement: Financial security and living arrangements

2. Manhattan, Kansas

    • Top traits: Education, healthcare, and financial security
    • Areas for improvement: Health and air quality

3. Ames, Iowa

    • Top traits: Education, general livability, transportation, and convenience
    • Areas for improvement: Employment and living arrangements

4. Columbia, Missouri

    • Top traits: Healthcare, education, and financial security
    • Areas for improvement: General livability and community engagement

5. Sioux Falls, South Dakota

    • Top traits: Financial security, community engagement, and healthcare
    • Areas for improvement: Wellness, living arrangements, transportation, and convenience

As you peruse the list, you may notice many of these cities are college towns. In addition, Sun Belt cities don’t dominate the choices, as some might guess. In fact, overall, Frost Belt cities appear to have a combination of factors that make them more attractive to older Americans.2

There are, of course, caveats that affect the results of the research:2

  • First, the index does not measure cultural diversity
  • Second, not all aspects of cities lend themselves to data-driven research, so some important attributes – both positive and negative – may not be considered
  • Third, negative factors may offset positive factors and affect a city’s rank. For instance, “a region struggling to emerge from economic doldrums and job shortages – which drag down its ‘Best Cities’ ranking – may at the same time be developing an admirable neighborhood ‘village’ pilot program, with transportation and services that enhance independent living for older residents.”

There is no right answer when it comes to deciding where to live during retirement. You may choose to live in a city that ranks high among these lists, stay in a beloved current city or town, or move to an entirely new locale. The key is giving serious thought to your preferences before you reach retirement age and making sure you have the financial resources to make it happen.

If you would like to talk about your plans for retirement, give us a call.

Sources:
1 https://www.goodreads.com/author/quotes/3242.L_Frank_Baum
2 http://successfulaging.milkeninstitute.org/2017/BCSA-2017.pdf
3 http://crr.bc.edu/wp-content/uploads/2009/08/wp_2009-16-508.pdf