Is The Bear Market Over?

Is the Bear Market Over?

On March 23, the S&P 500 closed 34% lower than it’s all time high. Since then, we’ve seen prices rebound nearly 27%. It has many people wondering,  “Is the bear market is over?” Today we’ll pose 4 questions that will help us determine if the new bull market has started.

Watch Now: Is the Bear Market Over?

Listen Now:
Is the Bear Market Over?

Subscribe Where You Find Your Podcasts

From February 1 to March 23 we saw the stock market reach bear market levels at a rapid pace. It was enough to rattle even the most disciplined investor. Since then, we have seen prices race higher. The gain has been roughly 27%. It has us all wondering, “Is the bear market over”

Bear Market Over - prices

Today the official answer is “maybe.” In my view, there are still 4 questions which need answered before we know if it is “officially over” or not

1. Has the Market Priced in the Bad News?

blank

The stock market is forward-looking—to a point. The price movements factor in a lot of projections about economic and earnings data. But how do you project something this extreme and unprecedented? We’ve never seen the economy forced to an almost immediate halt before now.

2. How Bad Will The Data Be?

blank

Standard and Poors projects earnings for the companies in the S&P 500 Index. Their most recent data shows an 18% reduction in profits for the first quarter of 2020. And that number was lowered from a week ago.  How much will the actual numbers differ from those estimates?

Gross Domestic Product—that’s the value of output from an economy—will almost certainly be worse this quarter. But how much worse? Some predict the worst quarter since the Great Depression. Will it be that bad?

Are You Ready to Retire?

If you are 50 or older, and thinking about your retirement.  Click here for a free retirement assessment.

3. How Will Investors React?

Is the bear market over

As a group, investors rarely react the right amount. There is a tendency to overreact on both extremes. In the dot-com era, we saw prices pushed irrationally higher. You could argue prices fell too far during the Great Recession too. How will people react this time?

Click here to subscribe

4. How Long Do We Suppress The Economy?

blank

The longer we keep the economy in an induced coma, the longer it will take to revive it. When do we reach the point where there is significant long-term damage to our economy? This may be the most important question to answer.

The End of the Bear Market

The bottom of this bear market could have been on March 23. If it was, we can celebrate—we are on our way to recovery. But we need to brace for the idea the worst of this downturn is yet to come. The market could drop further. If the data is worse than expected, it could drop a lot further.

Click here to subscribe

 

 

Don’t Miss An Episode

Get every episode of Monday Morning Money in your inbox.  Join our mailing list.

Subscribe Where You Find Your Podcasts

Free Download:
3 Things You Should Know About Bear Markets

Bear Market Guide financial advisor

In this free guide, we’ll share 3 things you need to know about bear markets, and 4 things you can do right now to survive it.

Financial Planning

About the Author

Neal Watson is a Certified Financial Planner™ Professional and a Financial Advisor with Fleming Watson Financial Advisors.  

Our Most Recent Videos And Posts

Still Not A Bear Market

Still Not A Bear Market, Yet

Right now, there is a lot of fear and panic on Wall Street. It looks and feels bad. Yesterday seemed to amplify those fears even more. The Dow fell over 2,000 points for the first time ever. It was a headliner type day.

You can’t brush a day like that aside and say, “It was no big deal.” It is a big deal. The 7.6% decrease was the worst day for stocks since 2008. And it was the 24th worst day ever recorded. And this comes on the heels of two of the wildest weeks I can remember in my 24 years as a financial planner.

It feels really bad. The “fear index” reached its highest level since the Great Recession. Volatility is extreme.

Still not a bear market

Still Not A Bear Market

But here’s the thing that hasn’t gained traction in the financial media. This is still not a bear market, yet. And “yet” is important. Year to date the stock market has dropped 15%. From it’s high in late February, prices have dropped 18.8%. We don’t find the bear until prices drop 20%.

I say “yet,” because we could easily find the bear’s den in the next few days. I believe it is more likely than not. But there is always a chance we don’t cross that line for a while, if at all.

STill Not a bear market

The Second Hardest Thing To Do...

This is the unpleasant part of being an investor. Riding through the waves of big down days and big up days. “It feels like we are riding The Beast at Kings Island,” as one client put it. That’s a pretty good analogy.

Unfortunately, it looks like this wild ride may continue for a while longer. The impact of the virus both to our health and the economy remains unknown. And now an oil price war adds to the hysteria. We have no control over the uncertainty or the attention. But we can control what we do.

Doing nothing is the second hardest thing to do in times like this. But it is often the best course of action. We can look back at the past 20+ years and find many reasons to sell our shares of great businesses. But those reasons can’t overshadow why we hold onto those positions.

Still Not a bear

What's The Hardest Thing To Do?

What’s the hardest thing to do in times like this? Buy more stock. The shares of these great businesses are on sale for a limited time. The prices might get better, but the sale won’t last long.  Remember, you are supposed to buy lower.  We may not see an opportunity like this again in our lifetimes.

Schedule a Call

At times, being a patient long-term investor is hard.  We are glad to discuss your situation in greater detail.  If you would like to talk to us, click the button. 

Financial Planning

About the Author

Neal Watson is a Certified Financial Planner™ Professional and a Financial Advisor with Fleming Watson Financial Advisors  He typically works with people who are planning for retirement.  Fleming Watson is a Registered Investment Advisory firm located in Marietta Ohio.  Our firm primarily serves Marietta, Parkersburg, Williamstown, St. Marys, Belpre, Vienna and the surrounding communities in Washington and Noble Counties in Ohio and Wood and Pleasants county in West Virginia.

You Should Expect A Stock Market Correction in 2020

You Should Expect a Stock Market Correction in 2020

Since late 2018, the stock market has raced higher. Along the way, it has hardly missed a beat. This year looks to be a very interesting year. But we should all be prepared for a reset of sorts. Today on Monday Morning Money, we’ll tell you why you should expect a stock market correction in 2020.

Watch: You Should Expect a Stock Market Correction in 2020

Audio Only Version:

Stay Up To Date. Join Our Mailing List.

Each week we will notify you when a new episode of Monday Morning Money is published. Please complete the form below to subscribe. 

Complete the Form to Subscribe

* indicates required

Each Episode of Monday Morning Money is also broadcast on Local Radio, WMOA (1490 AM and 101.3 FM).  You can hear it at 11:07 every Monday. 

Listen Now: You Should Expect a Stock Market Correction in 2020

Other ways to listen...

Stay Up To Date. Join our Mailing List.

Each week, we will notify you when a new episode of Monday Morning Money is published.  Please complete the form below o susbscribe.

Please Complete the Form To Join Our List

* indicates required

Schedule a 15 Minute Call

Do you have a question? Would you like to talk about how we can help you plan for a better retirement?
Click here to schedule a brief 15 minute call.  

A Quick Note:  This episode was recorded early last week.  We had no idea that the stock market would drop as rapidly as it did.  We officially entered correction territory last thursday. 

A Normal Part Of Investing

Why should you expect a stock market correction in 2020?  We have no real knowledge of impending doom or anything like that. Sure, we are dealing with the Coronavirus, and last week we saw the Stock Market react harshly to the ongoing news.  In addition, we are also dealing with a lot of political stuff.

In the past 40 years, there has been an annual price decrease of at least 7% a total of 33 times.

The textbooks define an official correction as a 10% decrease in stock prices. That has happened in 21 of the past 40 years—more than half of the time.

The average calendar year price drop since 1980 is 14%. And the stock market has had calendar year declines of that much—or more—15 times.

You Should Expect A STock Market Correction
Click to Enlarge

A Stock Market Correction Doesn't Mean A Bad Year

Of the past 40 calendar years, with all of those annual adjustments, how many times was the stock negative for the year? Seven.

Since 1980, the stock market posted a negative year seven times. That’s about 1 out of every five years. The average total return for stocks over that same time frame was 11.8% per year.

Download The Stock Market Correction Infographic

We created this infographic to show you the frequency and magnitude of annual stock market corrections.  Click on the button below do download your copy.

Expect Stock Market Correction

When You Expect A Stock Market Correction, You Can Make Better Decisions

These interruptions are normal. They are the rule, not the exception. The “reasons” why rarely matter, but how you react to the downturn does.

When we expect a correction, it makes us better investors. We can prepare ourselves for the possible downturn. And that can help us focus on making good decisions in what can be a stressful moment.

Tell yourself, “It’s gonna happen.” When it does, be disciplined and follow your plans. And that will help you avoid the mistakes that could cost you far more in the long run.

Schedule a 15 Minute Call

Do you have a question? Would you like to talk about how we can help you plan for a better retirement?
Click here to schedule a brief 15 minute call.  

What's On Your Mind?

Do you have a question about what’s happening in the world of finance or investing?  Is there a topic that has you curious?  We’d love to hear from  you.

 We’ll do our best to answer it in a future episode.  To submit your question, fill out the form.  If you prefer, you can send us an email directly.  That email address is neal@flemingwatson.com

Enter Your Question Here

Financial Planning

About the Author

Neal Watson is a Certified Financial Planner™ Professional and a Financial Advisor with Fleming Watson Financial Advisors  He typically works with people who are planning for retirement.  Fleming Watson is a Registered Investment Advisory firm located in Marietta Ohio.  Our firm primarily serves Marietta, Parkersburg, Williamstown, St. Marys, Belpre, Vienna and the surrounding communities in Washington and Noble Counties in Ohio and Wood and Pleasants county in West Virginia.

Our Most Recent Videos And Posts

Should You Buy Stocks At the Top of the Market?

Should You Buy Stocks at the Top of the Market?

Should you buy stocks at the top of the market?  This is a question submitted by a listener.  Click below to hear our answer.

Watch: Should You Buy Stocks at the Top of the Market?

Audio Only Version:

Each Episode of Monday Morning Money is also broadcast on Local Radio, WMOA (1490 AM and 101.3 FM).  You can hear it at 11:07 every Monday. 

Stay Up To Date. Join Our Mailing List.

Each week we will notify you when a new episode of Monday Morning Money is published. Please complete the form below to subscribe. 

Complete the Form to Subscribe

* indicates required

Listen Now: Should You Buy Stocks at the Top of the Market?

Other ways to listen...

Stay Up To Date. Join our Mailing List.

Each week, we will notify you when a new episode of Monday Morning Money is published.  Please complete the form below o susbscribe.

Please Complete the Form To Join Our List

* indicates required

Answering a Listener Question

John asks, “With the stock market so close to all-time highs, should I buy stocks, or should I wait?” 

The stock market is very close to all-time highs. We also keep hearing how this is—arguably—the longest-running bull market in history. And at some point, there will be some sort of major drop.

So, should you buy stocks at the top of the market?

It Can Be A Long Way Down

Here is the root of John’s concern. Nobody wants to be the person with perfectly imperfect timing.  This means you buy at the market’s high right before a bear market.  It can be painful. 

The last four major declines were

  • -49%(2000-2003),
  • -57%(2007-2009),
  • -19.4% (2011), and
  • -19.8% (2018).

Seeing your investment drop significantly and quickly isn’t exactly a good time.  But the bigger question we should ask is:

What would have happened if you had bought stocks right before the last 4 bear markets?

Buy Stocks at The top
Click to Enlarge

The Dot Com Bust (2000-2003)

Buying at the top in March of 2000, and holding it until the end of last year, your average return would have been 6% per year. And remember, you would have gone through four total bear markets in those two decades, including the worst one since the great depression.

The Great Recession

The next “top” was in October 2007. If you bought then, by the end of 2019, your average annual return would have been 8.% per year.

Buy Stocks Top
Click to Enlarge
Top of the market
Click to Enlarge

Spring 2011

 Buying the top in the spring of 2011 resulted in an average of return of 12% per year over those 8 plus years.

4th Quarter 2018

The last one was in the fourth quarter of 2018. Buying the top in late September 2018 resulted in a 10% return at the end of last year.

Market Top BUy Stocks
Click to Enlarge

Those returns won’t be as good as someone who was able to avoid those bear markets. But the number of people who can correctly guess those events are few and far between.

If Not Now, When?

The next thing you need to consider: if you don’t buy now, when will you? Do you use a rule or your “gut feeling?”

Some people will set a rule. If the market drops 10 or 15% they’ll buy. But what do you do if prices don’t drop far enough? If your target is 15% lower, and the market only drops 12% before it turns around, you miss opportunities.

Or do you use the “gut feeling” method? You’ll buy when it feels right.

When stocks are declining, the prevailing mood will tell you it’s going to get worse before it gets better. Buying low might be the right thing, but it will also be the hardest thing to do.

Lessons Learned

Here’s what I’ve learned over the past 24 years.  If you have the right mindset, the best time to buy stocks is when you have the money. On March 24, 2000, the closing high for the S&P 500 was 1527.  Four bears and twenty years later, the index closed at 3230.  And two of those bears two are two of the worst we’ve ever seen.

Chances are, and I believe this, we are going to see much higher highs in the future.  Trying to miss the trouble will likely mean you end up missing the returns you want.

What's On Your Mind?

This was a great question, and we are glad John sent it to us.  Do you have a question? We try to answer it on a future episode of Monday Morning Money.

To submit your question, fill out the form.  If you prefer, you can send us an email directly.  That email address is neal@flemingwatson.com

Enter Your Question Here

Financial Planning

About the Author

Neal Watson is a Certified Financial Planner™ Professional and a Financial Advisor with Fleming Watson Financial Advisors  He typically works with people who are planning for retirement.  Fleming Watson is a Registered Investment Advisory firm located in Marietta Ohio.  Our firm primarily serves Marietta, Parkersburg, Williamstown, St. Marys, Belpre, Vienna and the surrounding communities in Washington and Noble Counties in Ohio and Wood and Pleasants county in West Virginia.

Our Most Recent Videos And Posts

The Cost of the 4 Big 401k Mistakes

The Cost of The 4 Big 401K Mistakes

In a previous post, we talked about avoiding The 4 big mistakes in your 401(k).  This webinar will try to illustrate how much those errors could cost you over time.  

Webinar: The Cost of The Big 401K Mistakes

Important Information about These Illustrations

All of these examples are not actual investments.  Any rates of return shown are not guaranteed.  Past performance does not predict future results.  Your real life results could be better or worse than shown.  

Mistake 1: Failing to Maximize Your Employer Match

Cost of 4 big 401k mistakes

Mistake 2: Not Saving Enough

Mistake 3: Not Pursuing Growth

Mistake 4: Withdrawing Money From Your 401K

These Mistakes Can Cost You Thousands of Dollars

Given enough time, making these mistakes can cost you thousands of dollars.  Unfortunately, we still see people making these mistakes over and over.  Are you taking the right steps? If you aren’t sure, talk to a trusted advisor.  They can point you in the right direction and show you how to make improvements.  

If you happen to be looking for an advisor, we would love the opportunity to schedule a call. Just click the button to contact us.

 

Stay up to Date, Join Our Mailing List

Each week, we publish a new episode of Monday Morning Money. We spend a few minutes talking about personal finance, retirement, and investing.  We have a few ways for you to stay up to date.  Fill out the form on the right to join our email list.  Or you can follow on one of the platforms below.

Subscribe to Monday Morning Money

* indicates required



Financial Planning

About the Author

Neal Watson is a Certified Financial Planner™ Professional and a Financial Advisor with Fleming Watson Financial Advisors  He typically works with people who are planning for retirement.  Fleming Watson is a Registered Investment Advisory firm located in Marietta Ohio.  Our firm primarily serves Marietta, Parkersburg, Williamstown, St. Marys, Belpre, Vienna and the surrounding communities in Washington and Noble Counties in Ohio and Wood and Pleasants county in West Virginia.

Our Most Recent Videos And Posts

Avoid These 4 Big 401k Mistakes in 2020

Avoid These 4 Big 401k Mistakes in 2020

One of the biggest factors in your long-term financial success is avoiding the big mistakes. Unfortunately, we see many of the same common errors that—over a person’s career—can cost thousands if not hundreds of thousands of dollars. Try to avoid these 4 big mistakes in your 401k in 2020

Watch: Avoid These 4 Big 401k Mistakes in 2020

Audio Only Version:

Each Episode of Monday Morning Money is also broadcast on Local Radio, WMOA (1490 AM and 101.3 FM).  You can hear it at 11:07 every Monday. 

Stay Up To Date. Join Our Mailing List.

Each week we will notify you when a new episode of Monday Morning Money is published. Please complete the form below to subscribe. 

Complete the Form to Subscribe

* indicates required

Listen Now: Avoid These 4 Big 401k Mistakes in 2020

Other ways to listen...

Stay Up To Date. Join our Mailing List.

Each week, we will notify you when a new episode of Monday Morning Money is published.  Please complete the form below o susbscribe.

Please Complete the Form To Join Our List

* indicates required

Mistake 1: Not Maximizing Your Match

Many employers will match your 401k contribution.  If you put money in your account, your employer will too.  We typically see that amount range between 3% and 6% of your pay. 

Unfortunately, we see people who won’t maximize their employer’s match.  Not only are you not receiving all the pay you should, the long-term impact on your nest egg can be huge.    

Mistake 2: Not Saving Enough

Most financial planners suggest you should try to save between 10-15% of your pay for your future. In fact, the amount you save is the biggest factor in your long-term success.

Unfortunately, we see people who limit their savings level well below that. Often times, people will cap their savings in their 401(k) at the point where they maximize the employer match. For most of us, this probably won’t be enough to have the type of retirement we want.

Mistake 3: Not Pursuing Growth

A Nobel Prize winning economist once did a study that showed financial losses feel twice as bad as financial gains feel good. As a result, many people get more conservative with their savings than they should. This means they don’t put enough money in stocks.

Not being aggressive enough can lower your returns over time.  This actually adds more risk to your long-term plans.

Mistake 4: Withdrawing Money From Your 401k

Whether you change jobs or take an in-service distribution, withdrawing money from your 401k gets very expensive.

Most times we see this when people change jobs. Instead of rolling their balance to an IRA or their new employer’s plan, they withdraw the money. This results in taxes, early withdrawal penalties, and the loss of future compounded growth.

If your plan allows for in-service distributions, the costs will be similar.  Most of those distributions will be taxed and penalized.  The penalty applies when you are under age 59 ½.

How Much Will These Mistakes Cost?

How much will these mistakes cost you?  The numbers can be shocking.  The longer you have until retirement, the bigger the cost.  We have a special webinar where we illustrate the potential cost of these 4 mistakes. Click on the button to watch.

What's On Your Mind?

Do you have a question about what’s happening in the world of finance or investing?  Is there a topic that has you curious?  We’d love to hear from  you.

 We’ll do our best to answer it in a future episode.  To submit your question, fill out the form.  If you prefer, you can send us an email directly.  That email address is neal@flemingwatson.com

Enter Your Question Here

Financial Planning

About the Author

Neal Watson is a Certified Financial Planner™ Professional and a Financial Advisor with Fleming Watson Financial Advisors  He typically works with people who are planning for retirement.  Fleming Watson is a Registered Investment Advisory firm located in Marietta Ohio.  Our firm primarily serves Marietta, Parkersburg, Williamstown, St. Marys, Belpre, Vienna and the surrounding communities in Washington and Noble Counties in Ohio and Wood and Pleasants county in West Virginia.

Our Most Recent Videos And Posts

Are Your Kids a Risk To Your Retirement?

Are your kids a risk to your retirement? Many parents provide financial help to adult children. That assistance could impact your retirement.

 
A Preview: 
  • We share some interesting statistics
  • How it can impact when and how you retire.
  • In extreme cases, how it can deplete your nest egg.

Are Your Kids A Risk To Your Retirement?

Each Episode of Monday Morning Money is also broadcast on Local Radio, WMOA (1490 AM and 101.3 FM).  You can hear it at 11:07 every Monday. 

blank

In addition, you can also hear this episode on our YouTube Channel.  Please take a moment to subscribe, as it helps our analytics and improves our reach.  This also appears on Facebook and LinkedIn.  

Audio Only Version:  Click Here

What's On Your Mind?

Do you have a question about what’s happening in the world of finance or investing?  Is there a topic that has you curious?  We’d love to hear from  you.

 We’ll do our best to answer it in a future episode.  To submit your question, fill out the form.  If you prefer, you can send us an email directly.  That email address is neal@flemingwatson.com

Enter Your Question Here

When you think about the financial threats to your retirement, what comes to mind? Most people would immediately answer a “stock market crash.” Others might say “a prolonged nursing home stay or health care expenses.”

Both of those are legitimate concerns.

Are your kids a risk to your retirement?

For most of us, money is a finite resource. Helping our kids financially means we sacrifice our own needs. For some, that could mean not taking a vacation or delaying the purchase of a new car.  For others, it could mean they don’t save as much as they should for retirement. 

Statistics, Lies and More Statistics

ARe Your Kids A Risk To Your Retirement

79% of parents with adult children provide some sort of financial support for their kids. This would include things like cell phones, car expenses, rent or paying on student loans.

Kids Risk Your Retirement

Parents of 18-34 year olds spent twice as much on their kids as they added to their retirement accounts. 

Kids Risking Your Retirement

On average, parents spend about $7,000 per year helping their kids. This amounts to over $500 billion dollars annually.

Helping Your Kids Can Impact Your Retirement

For many, not saving enough for retirement can translate into working longer— if you can.
 
But, working longer may not be possible. Many Americans retire early because they have to. Lower Social Security benefits and a smaller nest egg create a difficult situation. Your lifestyle in retirement may suffer.

Could Your Kids Cause You To Run Out Of Money?

Over the past two decades, we can point to a handful of real life examples.  The extra income taken to help children was the primary reason a few clients saw their accounts go to zero.  These were extreme situations, but the outcome was not ideal.

Set Healthy Limits

There is nothing wrong with helping your kids.  My wife and I have adult children, and we have helped them at various times. And, if necessary, we will help again.  

You need to set a healthy limit to the assistance you provide.  Your retirement savings comes first.   If you are concerned about what is reasonable, check with a trusted professional.  They can provide an objective viewpoint to help you make a good decision.  

And if you aren’t working with a financial planner, we would welcome the opportunity to talk to you.  Click here to arrange a complimentary consultation.

Stay Informed.

Monday Morning Money is a podcast talking about current events which  impact your bottom line.  

If you would like to be notified when a new episode is released, sign up for our mailing list.  Just complete the form.

Join Our List Today!

* indicates required
Financial Planning

Neal Watson is a Certified Financial Planner™ Professional and a Financial Advisor with Fleming Watson Financial Advisors  He typically works with people who are planning for retirement.  Fleming Watson is a Registered Investment Advisory firm located in Marietta Ohio.  Our firm primarily serves Marietta, Parkersburg, Williamstown, St. Marys, Belpre, Vienna and the surrounding communities in Washington and Noble Counties in Ohio and Wood and Pleasants county in West Virginia.

Our Most Recent Videos

What is Tax-Loss Harvesting?

What Is Tax-Loss Harvesting? A listener asks a question about year end tax planning.  Can tax-loss harvesting help your tax situation?  Today we look at this strategy and how it
Watch Now

Is Bitcoin a Good Investment?

Is Bitcoin a Good Investment? Is Bitcoin a good investment? It is the new frontier in the investment world.  Its gains over the past six years will catch your eye. 
Watch Now

How to Pick Investments for Your 401k

How to Pick Investments for Your 401k Today we discuss how to pick investments for your 401k.  Do the performance statistics matter?  What about expenses? What are the most important
Watch Now

Obstacles To Your Retirement

Obstacles To Your Retirement What are the biggest obstacles to retiring when you want to? Whether you are two years from retirement or 20 years, we all face similar obstacles.
Watch Now

Bonds With Negative Yields

There are over 17 trillion dollars of bonds with negative yields. Does this mean you are paying someone for the privilege of loaning them money? And why are people buying them?

Monday Morning Money—Bonds With Negative Yields

Each episode of Monday Morning Money is also broadcast on Local Radio, WMOA (1490 AM and 101.3 FM).  You can hear it at 11:07 every Monday. 

blank

In addition, you can also hear this episode on our YouTube Channel.  Please take a moment to subscribe, as it helps our analytics and improves our reach.  This also appears on Facebook and LinkedIn.  

What's On Your Mind?

Do you have a question about what’s happening in the world of finance or investing?  Is there a topic that has you curious?  We’d love to hear from  you.

 We’ll do our best to answer it in a future episode.  To submit your question, fill out the form.  If you prefer, you can send us an email directly.  That email address is neal@flemingwatson.com

Enter Your Question Here

$17 Trillion of Bonds With Negative Yields

There has been a lot of attention lately about the more than $17 trillion of debt with negative yields. Much of that is issued by foreign governments. But there is about a trillion dollars in corporate debt with negative yields
 
So does this mean you are paying these countries for the privilege to loan them money?

The Basics of Yield

Yield is the return you will earn if you buy and hold a bond until it matures. It factors in the interest rate, the return of your principal, how long until it matures, and the price you pay.
 
So keep in mind, yields and interest rates are NOT the same thing. In some cases, these bonds could pay the investor interest. German bonds currently do not. But you can have a bond with a negative yield which does pay interest.
 
The thing which causes their yields to be negative is the price investors have to pay. Paying a high price and holding the bond to maturity assures you of a negative return—even though you might collect interest along the way.
 
Let’s look at a simple example. You have a bond which matures 10 years from now. It has a coupon or interest payment of 1.6% per year. You collect that for the life of the bond. When the bond matures, the issuer typically redeems them at a price of $100. If you buy this bond for a price of $116 or more, your yield will be negative. Why? Because the return from your interest won’t be enough to compensate for the high price you have to pay.

Why Buy Bonds With Negative Yields?

This is where it helps to understand the relationship between yield and bond prices. Yields and prices are inversely related. That means if one goes up, the other goes down. Think about a teeter totter. On one end you have prices, the other side yields.
So why would someone buy bonds with negative yields? If you know you are going to lose money holding these notes, why wouldn’t you just put the money under your mattress?
 
One theory is speculation.  Those who are buying these notes are speculating that yields will go even lower. That’s the only way buying a bond with a negative yield results in a profit.
  
Those who are buying these notes are speculating that yields will go even lower. That’s the only way buying a bond with a negative yield results in a profit.

Buy Low, Sell High

There is a saying in the investment world. Buy low, sell high. With bond yields at extremely low—and in some cases negative—levels, it means prices are already high. Buying bonds with negative yields, or longer term bonds with very low yields, seems like a recipe for the opposite.
 

Stay Informed.

Monday Morning Money is a podcast talking about current events which  impact your bottom line.  

If you would like to be notified when a new episode is released, sign up for our mailing list.  Just complete the form.

Join Our List Today!

* indicates required
Financial Planning

Neal Watson is a Certified Financial Planner™ Professional and a Financial Advisor with Fleming Watson Financial Advisors  He typically works with people who are planning for retirement.  Fleming Watson is a Registered Investment Advisory firm located in Marietta Ohio.  Our firm primarily serves Marietta, Parkersburg, Williamstown, St. Marys, Belpre, Vienna and the surrounding communities in Washington and Noble Counties in Ohio and Wood and Pleasants county in West Virginia.

Our Most Recent Videos

What is Tax-Loss Harvesting?

What Is Tax-Loss Harvesting? A listener asks a question about year end tax planning.  Can tax-loss harvesting help your tax situation?  Today we look at this strategy and how it
Watch Now

Is Bitcoin a Good Investment?

Is Bitcoin a Good Investment? Is Bitcoin a good investment? It is the new frontier in the investment world.  Its gains over the past six years will catch your eye. 
Watch Now

How to Pick Investments for Your 401k

How to Pick Investments for Your 401k Today we discuss how to pick investments for your 401k.  Do the performance statistics matter?  What about expenses? What are the most important
Watch Now

Obstacles To Your Retirement

Obstacles To Your Retirement What are the biggest obstacles to retiring when you want to? Whether you are two years from retirement or 20 years, we all face similar obstacles.
Watch Now

A More Conservative Approach

As the stock market and the economy have continued to chug along, we felt it was time for a more conservative approach.  Today we talk about some of the steps we are taking to reduce investment risk for our clients.  

What's Happening Now: A More Conservative Approach (4:36)

What's On Your Mind?

Do you have a question about what’s happening in the world of finance or investing?  Is there a topic that has you curious?  We’d love to hear from  you.

 We’ll do our best to answer it in a future episode.  To submit your question, fill out the form.  If you prefer, you can send us an email directly.  That email address is neal@flemingwatson.com

Enter Your Question Here

Our Expectation: Stocks Will Act Like Stocks

We expect stocks to act like stocks. This means we believe—over the long term—they will perform well. They will generate the returns we need to improve our purchasing power and grow our assets.
 
It also means the growth won’t happen in a straight line. There will be periods of stress and pain along the way.
 
The market is at all time highs. And we haven’t seen a true bear market in over a decade. The current economic expansion is the longest on record. We felt it is time for a more conservative approach.  
 
Here is how we are doing it.

Step 1: Rebalancing

Rebalancing your account means we reset your asset allocation. Here is an example. A couple of years ago, John’s account had 60% of its value in stocks. The other 40% was in bonds. Because the stock market has done extremely well, the stock allocation grew to 65%.
 
Rebalancing his account sells some of the stock holdings and buys bonds. When complete, his allocation is reset back to 60% equity and 40% bonds.
 
In September, we will have an episode of Monday Morning Money about rebalancing.

Step 2: New Core Holdings

 Over the past two months, we have reviewed many of the core holdings in our portfolios. We determined several funds needed to be replaced. One of the by products of these changes was reducing some of the investment risk.
 
One tool we use to help measure the investment risk of our portfolios is a service called Riskalyze.  We measure the risk characteristics of the funds and ETF’s we use.  
 
Riskalzye also helps us to better understand how you feel about the risk and reward.  You can complete a brief survey to find your Risk Number.  There is a link below.  It costs nothing, and it takes 5 minutes or less to answer the questions.
2020 bear marketover

How Much is Too Much?

How much risk can you tolerate?  Would you be uncomfortable if your portfolio was down 10% in the next six months?  What about 20% or more?  Our 5-minute risk assessment questionnaire (powered by Riskalyze) will help you identify your appetite for risk and reward.  We can then take a look at your accounts to see if your investments align with the results. 

Taxes Matter

Most of these changes will occur in IRA’s or other types of accounts which don’t create a tax bill for you. If there are changes which need to be made in a taxable account, we will call you to discuss the tax implications.

Stay Informed.

What’s Happening Now is a podcast talking about current events which  impact your bottom line.  

If you would like to be notified when a new episode is released, sign up for our mailing list.  Just complete the form.

Join Our List Today!

* indicates required
Financial Planning

Neal Watson is a Certified Financial Planner™ Professional and a Financial Advisor with Fleming Watson Financial Advisors  He typically works with people who are planning for retirement.  Fleming Watson is a Registered Investment Advisory firm located in Marietta Ohio.  Our firm primarily serves Marietta, Parkersburg, Williamstown, St. Marys, Belpre, Vienna and the surrounding communities in Washington and Noble Counties in Ohio and Wood and Pleasants county in West Virginia.

Our Most Recent Videos and Podcasts

What is Tax-Loss Harvesting?

What Is Tax-Loss Harvesting? A listener asks a question about year end tax planning.  Can tax-loss harvesting help your tax situation?  Today we look at this strategy and how it
Watch Now

Is Bitcoin a Good Investment?

Is Bitcoin a Good Investment? Is Bitcoin a good investment? It is the new frontier in the investment world.  Its gains over the past six years will catch your eye. 
Watch Now

How to Pick Investments for Your 401k

How to Pick Investments for Your 401k Today we discuss how to pick investments for your 401k.  Do the performance statistics matter?  What about expenses? What are the most important
Watch Now

Obstacles To Your Retirement

Obstacles To Your Retirement What are the biggest obstacles to retiring when you want to? Whether you are two years from retirement or 20 years, we all face similar obstacles.
Watch Now