Ladies and gentlemen, the weekend! In this space each week, Greg and I share some of our favorite articles, notes, and graphics from the past week along with our commentary. Please feel free to provide feedback and forward along to others if you enjoy. We appreciate you taking the time to read. 

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Bear Market Opportunities for Every Generation of Investors

“No one likes losing money, but down markets do create opportunities for higher expected returns in the future. It never feels good to be invested when markets are falling, but every bear market in history looks like a buying opportunity with the benefit of hindsight…

The reason bond returns have been so dreadful this year is because interest rates are so much higher and the starting yields were so low. It was really the worst combination you could hope for when it comes to fixed income.

But now that those yields are so much higher, investors have a much bigger margin of safety should rates continue to rise.

And the best part for retirees is short-term bonds such as one- and two-year Treasuries now have higher yields than long-term bonds. This is a good thing because, all else equal, the shorter the duration in the bond or bond fund, the lower the volatility in price when interest rates move.

This means retirees can now lock in 4% yields on bonds that have very little interest rate sensitivity…

[Gen X] should be approaching their peak earnings years, when they are able to put even more money to work in the markets than ever before.

The older Gen Xers should also probably be thinking about slowly but surely getting more defensive with their portfolio as they age. The good news is yields for more defensive assets such as bonds are now much higher and stock prices are much lower.

It’s the best of both worlds.”

I enjoyed this straightforward article that addressed the different current market opportunities by age/generation. Although we address asset allocation by risk and financial planning rather than just by age, there is some good, practical advice, especially noting how higher interest rates can help dampen volatility going forward.

US Leading Economic Indicators

“’The US [Leading Economic Index] fell again in September and its persistent downward trajectory in recent months suggests a recession is increasingly likely before yearend,’ said Ataman Ozyildirim, Senior Director, Economics, at The Conference Board.

The six-month growth rate of the LEI fell deeper into negative territory in September, and weaknesses among the leading indicators were widespread.

Amid high inflation, slowing labor markets, rising interest rates, and tighter credit conditions, The Conference Board forecasts real GDP growth will be 1.5 percent year-over-year in 2022, before slowing further in the first half of next year.”

The Conference Board’s LEI has been one of the more reliable predictors of economic recessions. Its 6-month growth rate officially tipped into recession signal territory with the latest report.

You can now apply for Biden's student loan relief plan. Here's how

“On Monday, President Biden announced the application for his student loan relief program is officially live.

The administration published a beta version of the application last week. Since its launch on Friday, more than 8 million borrowers have already applied for debt relief, with no reported glitches or crashes according to the White House.

Biden's plan is to cancel up to $10,000 in debt for those earning less than $125,000 per year and up to $20,000 for those who received Pell Grants.

The application asks for borrowers' name, date of birth and social security number, among other things. The form is available in both English and Spanish on desktop and mobile sites. It will be open through Dec. 31, 2023.

Borrowers will not need what's known as an FSA ID to log into the application, nor will they need to upload any documents, including tax records. Instead of having to provide documents that verify that you, as an individual, earned less than $125,000 in 2020 or 2021 or, as a couple, less than $250,000, the application simply asks borrowers to check a box to ‘certify under penalty of perjury under the laws of the United States of America that all of the information provided on this form is true and correct.’”

“Of the 23 bear markets since WWII, 8 have bottomed in October for [the Dow Jones Industrial Average] DJIA and 7 for S&P 500, 6 for NASDAQ, significantly more than any other month. Over all three indices, 7 were in midterm October: 1946, 1960, 1966, 1974, 1990, 1998 & 2002.”

“There is still a BIG gap between observed (Zillow) and surveyed rents with the latter being used in the [Consumer Price Index] and we have recently seen how shelter/housing has been THE main driver of US inflation. Surveyed rents tend to lag the actual housing market by 12-18 months, which is an issue that the Fed is aware of, but yet refrain from admitting fully to in policy making. This rear-view-mirror-navigation poses a material risk to central bank’s ‘overdoing it’.”

Thanks for reading. Have a great weekend!