Fed Pivots- Now What? Health Risks for Solitary Retirees - Loneliness
Last week brought the fulfillment of multiple events the market had been watching, including the FOMC decision (the pause), key April economic data (hard landing/soft landing) and Q1 earnings (which are basically over). So, given what’s happened, I want to step back and update the state of each event, and identify what happens next.
Fed Policy. What Happened: The Fed paused. Market Impact: Neutral. This was already priced in so it helps support stocks but won’t push us materially higher. What’s Next: Barring a jump in inflation, when does the pivot occur (sooner the better)?
April Economic Data. What Happened: Data was generally “fine” and did not signal a hard landing (although it left the possibility for one intact). Market Impact: A hard landing remains the biggest potential negative for stocks, so the fact that data did not imply a hard landing helped stocks rally. What’s Next: This week’s CPI report, and then the May economic data (the hard landing vs. soft landing issue remains the biggest one for markets).???
Earnings. What Happened: The Q1 earnings season was better than feared, with a high number of companies (more than 80%) beating estimates. Market Impact: Neutral. Earnings are helping to support stocks, but guidance wasn’t great and earnings season won’t push the S&P 500 higher. What’s Next: Guidance was underwhelming and that will have to be increased for earnings to be a tailwind).
In sum, the events of last week largely came out “ok” for markets and imply that the March and April rally was valid, so that’s a positive. However, it’s important to realize that risks on the horizon didn’t dissipate. Even after the Fed decision, Q1 earnings and April economic data, we don’t know, for sure, if: 1) The Fed will actually cut rates this year (if not, that’s a negative), 2) If earnings can hold up (Q1 results were good but guidance was not, that’s a potential problem) and 3) The economy can maintain this soft-ish landing.?
Bottom line, the events of May were “ok” and positive for stocks, but most of them were already priced in and they don’t remove the possibility of future negatives. As such, we continue to think a cautious approach centered on large-cap defensives and tech, minimum-volatility ETFs and long-dated Treasuries remains the best way to maintain long exposure, but also account for the fact that none of the major issues that could cause a sharp market decline have been eliminated.?
In the Planning Corner, we target one of the most important components to a healthy retirement lifestyle - companionship and social networks. The US Surgeon General published a report last week highlighting the pervasive impact of loneliness and depression among the elderly.
Following up on last week’s topic of lifestyle transition through hybrid retirement involving part-time employment, this week we highlight one of the hidden benefits of remaining involved in the workforce.
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A new Surgeon General Report titled The U.S. Surgeon General’s Advisory on the Healing Effects of Social Connection and Community warns of the epidemic of loneliness and isolation. Remaining in the workforce provides social infrastructure to maintain social connections, providing opportunities for engagement and participation.
For some, their extended family, religious faith groups, or neighbors provide these opportunities. Each of us must cultivate our own “tribe” as we get on in years to provide healthful engagement.
Your retirement journey should be about more than the dollars and cents. You need people to share it with to make the journey worthy!
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