Scott Peterson: What will it take to shake investors’ confidence?
December 7, 2017
From the perspective of unsettling events, last week was jam-packed. North Korea claimed to have the capability to strike the United States with a nuclear missile, tax reform continued to travel a controversial path through the House and Senate, and former national security adviser Michael Flynn pled guilty to lying to the FBI about conversations with Russia's ambassador.
U.S. stock markets weren't immune to these events and some lost value. However, the Dow Jones Industrial Average and the Standard & Poor's 500 Index didn't stay down for long. Both indices finished the week higher.
Barron's reported black-box trading may have been the reason "…the Dow shed 400 points from peak to trough in a matter of minutes. The drop happened so quickly that some opined that humans couldn't have been responsible for the tumble. 'No way real traders were moving that fast,' says Andrew Brenner, head of international fixed income securities at NatAlliance Securities. 'Clearly, it was algorithms taking over.'"
The CNN/Money Fear & Greed Index is an investor sentiment gauge that relies on seven market indicators — stock price momentum, strength, and breadth, put and call options, junk bond demand, market volatility, and safe haven demand — to measure whether fear or greed is driving the market. Last week, the needle was in the Greed range, as it has been for some time.
For a number of years, policymakers have been focused on finding ways to help Americans become better financially prepared for retirement. Studies have found having access to payroll-deduction retirement savings plans at work makes it 15 times more likely Americans will save for the future. Consequently, policymakers have focused their attention on smaller companies. About 36 percent of Americans work for companies with fewer than 100 employees, and many of these businesses do not offer retirement plans.
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Last July, Oregon launched OregonSaves, the state's auto-IRA program. Companies that don't have workplace retirement plans are required to facilitate the program by:
Providing information to set up Roth IRA accounts for employees
Making payroll deductions to the Roth accounts
Delivering updated employee information
California, Connecticut, Illinois, Maryland, and Massachusetts are working on similar programs.
Some business owners have embraced the auto-IRA opportunity, while others object to having the government involved. A Pew Charitable Trusts survey of 1,600 small and mid-sized business owners found 51 percent would prefer to sponsor their own retirement plans rather than participate in a state-run plan.
Many employers who participated in focus groups were not aware low-cost retirement plan options are available in the marketplace. Pew researchers noted
"Most (small and medium-sized employers) did not have a full understanding of how 401(k) plans work, and few were familiar with plans or incentives designed for small businesses, such as the Simplified Employee Pension (SEP) Plan, the Savings Incentive Match Plan for Employees (SIMPLE), or the small employer tax credit for retirement plan startup costs."
D. Scott Peterson is CEO and head investment manager for Peterson Wealth Management. If you wish to contact him, please call 775-673-1100, or visit PetersonWM.com.