Asset allocation has long been considered a cornerstone in wealth management. However, a recent study from the Center for Retirement Research at Boston College challenges this notion. The report states, “The focus on asset allocation is misplaced,” as discussed in the paper titled “How Important Is Asset Allocation To Financial Security In Retirement?” At first glance, this finding appears to undermine decades of research emphasizing asset allocation as critical for effective portfolio management. Should investors abandon this concept? The answer is a resounding no.
Is the recent report on job growth, which showed disappointing results, signaling the end of economic expansion? Some analysts suggest that the slowdown in payroll growth for March may indicate an irreversible downturn. The reality, however, is that it’s too soon to draw conclusions about whether this trend will continue or if it’s just a temporary setback in an otherwise recovering job market. Unlike the more popularly analyzed establishment survey, the household survey gives a more optimistic view, as noted by Scott Grannis in his analysis. For now, the situation remains uncertain, and we must await additional data to clarify these conditions. It’s vital to acknowledge the potential for issues, especially given the unsettling results from the establishment survey, which highlight the fragility of overall growth. While the risk of a downturn appears to be increasing, it is premature to declare a new recession inevitable.
● White House Burning: The Founding Fathers, Our National Debt, and Why It Matters to You
By Simon Johnson and James Kwak
Blog post by co-author (Johnson) via Economix (NY Times)
Throughout American history, there have been six significant surges in debt relative to G.D.P: during the War of Independence, the War of 1812, the Civil War, World Wars I and II, and since 2000. In the first five cases, debt escalated as the government sought resources for military efforts. Post-war, each experienced gradual debt reduction relative to the economy—over many years, not mere months. The current debt spike since 2000 is unique; James Kwak and I delve into the reasons in our newly released book. Besides the two costly wars in Iraq and Afghanistan, a significant portion of the deficit increase stems from the tax cuts under George W. Bush, Medicare Part D (which expanded prescription drug coverage), and chiefly, the financial crisis that severely hampered the economy and significantly decreased tax revenues starting in September 2008. Today’s debt issues are more a result of shrinking federal revenue than excessive spending. If you maintain that our fiscal problems are solely due to “runaway spending,” our book is a must-read. We advocate for a balanced approach, prioritizing deficit control while fostering economic growth.
Are we experiencing déjà vu? With the arrival of spring, recent economic data seems to be weakening once more. The private-sector nonfarm payrolls increased a mere 121,000 in March on a seasonally adjusted basis, a significant drop compared to the robust 233,000 in February. Such numbers are disappointing and far below economists’ expectations. Today’s jobs report raises new concerns over the economy’s underlying strength, suggesting that the unseasonably warm winter may have artificially inflated previous figures.
Initial jobless claims fell again last week, reaching a new four-year low and indicating that growth in the labor market is expected to continue. For the week ending March 31, new unemployment benefit applications decreased by 6,000 to a seasonally adjusted total of 357,000.
According to the latest ADP Employment Report, private-sector payrolls rose by 209,000 last month on a seasonally adjusted basis. While this is a positive sign, the question remains: Is this enough? This concern arises because, despite a noticeable increase in job growth recently, which is an improvement compared to the more sluggish pace observed in the previous year, the rapid job creation has not alleviated the gradual decline in year-over-year changes in disposable personal income. Perhaps a significant turnaround on that front is on the horizon; achieving it requires maintaining a strong pace of payroll growth. Nevertheless, the latest ADP estimate for March shows a slight decrease from February’s 230,000 gain, which has led analysts to provide cautious optimism.
While inflation remains mild and is even declining, concerns among investors persist. A new survey conducted by MFS Investment Management reveals that investors are more anxious about inflation over the next year compared to their financial advisors. According to the MFS Investing Sentiment Survey, 60% of investors expressed concerns about rising inflation within the next year. In contrast, only 41% of financial advisors share this concern.
In the latest installment of our series on ETFs that can replicate the Global Market Index (GMI)—a passive, unmanaged benchmark consisting of key asset classes—we shift our focus today to high-yield ETFs, following our previous discussion on broadly defined, investment-grade U.S. bond funds.
The winter of our content? How much did weather skew U.S. data?
Irwin Kellner (MarketWatch) | Apr 3
Attention is focused on the forthcoming March employment data to determine whether recent improvements are genuine or merely statistical artifacts. Typically, the weather becomes milder at this time of year, minimizing seasonal adjustment distortions. Nonfarm payrolls averaged a growth of 245,000 from December to February, compared to only 157,000 during the prior three months—an impressive improvement. Should the March employment data mirror or surpass previous months, it could affirm the winter’s progress. Conversely, a disappointing report would indicate that winter’s uptick was merely an illusion.
The first prominent economic report for March indicates continued growth in the economy, supported by a slight acceleration in manufacturing activity. The ISM factory index increased to 53.4 in March, up from February’s reading of 52.4. A figure above 50 indicates expansion within the manufacturing sector.
### Introduction
This collection of articles delves into recent economic reports, survey results, and financial analyses that showcase the current state of various elements within the economy. Each segment reviews significant indicators, including job growth and inflation, and offers insights into market dynamics, helping to illuminate challenges and opportunities present in wealth management and economic forecasting.
### Conclusion
In summary, navigating the complexities of the current economic landscape requires a careful analysis of indicators such as job growth and inflation. The perspectives shared in these articles provide a broader understanding of trends that influence financial security and wealth management, underscoring the importance of staying informed in an ever-evolving environment.
