The Markets September 1, 2010

After a Rough August, Could September Be Worse?

 As rough a month as August was for the markets – and this one was the worst since 2001 - September has a tendency to be even rougher.
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In fact, for the entire 39-year history of the Wilshire 5000 Total Market Index, September is the worst average return month for the index.  How bad is it?  Well, during that time frame, September is the only month with an average negative return – and those trending also hold true for the last 25 years of index history. 

And while October’s stock market declines are the stuff of legend, the 39-year average Wilshire 5000 Total Return for September is -0.73%, while the next worst performing month is July with a return of 0.12%. 

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The 25-year average Wilshire 5000 Total Return for September is -0.82%, while the next worst performing month is October, but even there the broad-based index gains 0.04%. 

Does this mean that investors can expect the Wilshire 5000 to be negative this September to be?  No because the split between positive and negative Septembers is as close to 50/50 as you can get with 12 of the last 25 and 20 of the last 39 years having positive returns. 

Excluding dividends, for the month of August, the Russell 2000 slid 7.50%, the NASDAQ dropped 6.24%, the Wilshire 5000 Total Market Index lost 4.91%, the S&P 500 fell 4.74%, and the Dow closed off 4.31%.  Year-to-date the NASDAQ has lost 6.84%, the S&P 500 has fallen 5.90%, the Wilshire 5000 Total Market Index has declined 4.74%, the Dow has dropped 3.96%, and the Russell 2000 has tumbled 3.73%.

According to Wilshire, the Wilshire 5000 Total Market Index represents the broadest index for the U.S. equity market, measuring the performance of all U.S. equity securities with readily available price data.

 

Data & Research September 1, 2010

Workers Gaining Back Some Retirement Confidence

Older workers’ confidence in their ability to retire comfortably has rebounded modestly in the past year, although confidence levels remain well below those prior to the financial crisis.
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The Towers Watson survey found that the percentage of older workers (ages 50 to 64) who are very confident about having enough resources to live comfortably five years into retirement rebounded from 44% in March 2009 to 50% this year. In 2007, 63% of older workers were very confident.   

While only 9% of all workers believe their assets will last through 25 years of retirement, that is still a slight improvement since last year, Towers Watson said in a press release.   

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Employees with defined benefits (DB) plans have considerably more confidence in their retirement resources than those with only a defined contribution (DC) plan. More than half (52%) of workers with DB plans are somewhat or very confident of having enough resources to live comfortably 25 years into retirement, compared to only one-third (34%) of older workers with DC plans.   

According to the press release, while concerns among older workers with DB plans have eased, younger workers are growing increasingly worried over their DB benefits. The percentage of older workers who are concerned that their employer will reduce the benefits they earn in the future declined from 44% in 2009 to 39% this year, while the percentage concerned their employer will eliminate benefits they earn in the future dropped from 38% to 30%.   

Among younger workers (under age 40), however, more than two-thirds (68%) are concerned their employer will reduce future benefits, an increase from 61% in 2009, while the percentage concerned their employer will eliminate benefits increased sharply, from 42% in 2009 to 59% this year.  

Other survey findings include: 

  • More than half (55%) of all respondents said they had seen significant declines in their retirement savings over the last two years, a slight improvement from 60% in March 2009. 
  • The percentage of employees who are content with their financial situation today has increased slightly -from 26% in March 2009 to 33% this year.

 

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