Anemic job gains in March aren’t the workforce’s biggest problem. The official unemployment rate is a sham. To get a more accurate picture of our nation’s torpid job situation, look at a more telling statistic: the still-lofty unemployment level using a broader measure of the labor force than the standard one.
The magic asset allocation number so often touted is a 60/40 split between stocks and bonds. This is supposed to give you the growth potential of equities and the stability of fixed-income. Trouble is, that mix didn’t do so well over the past 10 years.
The Federal Reserve bases its monetary policy on augury. Thousands of years ago, Roman soothsayers visited the oracles and interpreted the entrails of slaughtered animals. We haven’t advanced much since then, as a review of the Fed’s most recent prophecy shows.
Expect choppy markets ahead. That’s what we’ve seen lately, and there’s more reason than ever to expect this to continue. Bullish and bearish factors are at war, producing frustrating up-and-down stock market movements.
Focusing on market trends is a foolish way to invest – essentially betting that what has done well will continue to thrive. A new book from financial guru Tony Robbins, for instance, looks to the past to plan for the future. We all love, even need, predictability. But depending too much on what’s come before in the markets can turn your portfolio into a train speeding toward a wreck.
A classic asset allocation balances stocks and bonds. Yet even though stocks return better in the long term, investors since the financial crisis – which hammered equities hard – tend to favor bonds. For their own future’s sake, they ought to redress the balance.
You hear predictions all the time that inflation is eventually coming. Right now, with the Consumer Price Index below 2% yearly, that doesn’t seem like much of a concern. But some day, investors will encounter a stronger inflation tempo. What likely will happen to their stock and bond portfolios then?
Does increasing inflation boost economic growth? And do dropping prices hurt growth prospects? No and no. But to hear the Federal Reserve tell it, that’s the way the world works.
Investors are worried about deflation, a debilitating curse that has dogged Japan for years and savaged the U.S. during the Great Depression. But they shouldn’t be. Today’s falling prices are far more likely to set the stage for inflation ahead, likely gentle.
Now is a great time to pick up suddenly cheap oil-related assets. With the rapid decline in oil prices from a peak of around $110 a barrel to recent lows below $50, a scramble has ensued to pick up bargains in the oil patch.