Today's Fear is Likely Tomorrow's Reward Part 2 Discussed by Matt Golab

This is a title of an article that was posted on MarketWatch.com on Tuesday the 16th. Over the last few days major U.S. indexes have fluctuated wildly both to the positive and to the negative.
 
 
Matt Golab
Matt Golab
ELK GROVE, Calif. - Dec. 23, 2014 - PRLog -- This brings us to the housing market and interest rates, now it would be impossible to talk about housing without mentioning the impact of the Fed. However, I don't want to overemphasize the Fed's impact on housing either. The Fed has mentioned in the last meeting that they will be patient and cautious with the rise in interest rates, and remember their rise in interest rates will have the largest impact on lending interest rates and a minimal impact on savings interest rates because of how much cash they have thrown in.

Because of their commitment to patience and aware of how the economy responds along the way we can expect the housing recovery to still crawl along. The reason I saw crawl is because of this: new home sales fell 81% from 1.4 million to 400,000 during the recession which ended in spring of 2009. But even this year we are only at 467,000 sales of new home which is 66% below the high.

Housing starts didn't do much better which were at 2.2 million and then dropped 78% to 478,000. 2014 will hit about a million down 55% from pre-recession highs. The impact on affordability can't be ignored either, according to the National Association of Realtors affordability has improved over 70%. This makes me think that housing still has massive room to recover, homes will remain affordable, and with the Fed being cautious mortgages and mortgage rates will still be kept in check.

I rarely talk about interest rates without pointing out the difference between savings rate inflation and lending rate inflation. Lending rate inflation we will probably see creep up about 1% over the next twelve to eighteen months. However, savings rate inflation we will probably see take much longer in part due to the massive amounts of cash banks are sitting on ready to lend thanks to years of Quantitative Easing.

In April the 10-year Treasury was about 2.7% and at the beginning of December was about 2.3%. This will have an impact on many areas, preemptive fear may be causing investors out of the market and back into safer options which is driving the yield down. Another impact of this drop in yield will be on Fixed Annuities and Annuities that offer Income Riders. Because Insurance Companies invest heavily in Treasuries these low yields will cause them to change rates for new contracts. For those on the fence about purchasing these types of annuities a narrow window appears to be closing.

This is also emphasized by Mutual-Fund numbers recently released from the retail world. When I say retail world I am speaking of the local bank or credit union, the brick and mortar Fidelity around the corner, or something like that, the commission based broker. This mutual fund info could be good news for an extension of the market rally into the months coming.

The memory of 2008 runs in both investors minds and the minds of mutual fund sellers. Despite a tremendous rally in equities the last number of years according to the data investors are still reluctant to invest into equity mutual funds. For years many have been talking about a great rotation from bonds into equities encouraged by the gains in equities influencing investors and advisors back into the equity market. But according to the Investment Company Institute the rotation has not begun yet.

In 2013 bond funds lost about $27 billion and money market funds lost about $21 billion and equity funds saw all that money flow to them. But the rotation stalled in 2014 even as the market continued to rally cutting the flow into equities by 66%. A partial explanation of this hesitation is the bombardment by marketing of a collapse that was supposed to happen back in 2009 and the other factor is bond investors have suffered much less trauma than equity investors.

Over a 10-year time frame equities, as measured by the S&P, average about 8% a year far higher than bonds but most do not look at the averages but remember the losses. The shock on 2000, 2002, and 2008 are forever burned in investors minds. The fear marketing so many investors have endured plus the remembrance of the recent crashes are posing an opportunity. By holding back funds from equities many have not reached their value and explains why so many managers look at stocks as cheap despite the market indexes being at all time highs. This "money on the sidelines" brings an argument for a continued rally through the year and into 2015. In fact a recent survey of market strategists, on average expect the S&P 500 index to keep climbing the wall of worry to end 2015 nearly 10% higher than current levels.

Matt Golab was recruited to write a chapter in Tom Hopkins recent book, Victory which became a National Best Seller. Matt also received the Editors Choice Award for his contribution to Victory, not every contributor is selected for this high honor.

Matt is an authority on creating innovative tax and investment solutions to help his clients succeed in their retirement years.  The strategies Matt Golab has established and passed on through successful financial planning with hundreds of clients over the years has launched him into the national spotlight.

He is often featured in Retirement Advisor Magazine, a publication which attracts the top financial planners in the country. Matt has been featured in newspapers around the country passing on the principals for a successful retirement. Golab is often asked by national websites that focus on the education of consumers to present his knowledge on the areas of retirement and retirement income plans.

Matt is frequently featured in The Wall Street Journal, CNBC, MSN Money, The San Francisco Chronicle, Newsweek, TheSmartRetiree, Burlington County Times and appeared nationwide on ABC, CBS, Fox, and NBC as well as USA Today.

Matt has a weekly radio show where he discusses all aspects of retirement planning, total wealth management, and estate strategies. Through his relationship with Retirement Radio Network experts such as David Walker former Comptroller General of the United States, Harry Dent of the H.S. Dent Foundation, John Bogle of the Vanguard Funds and many more have been heard on his show Income Forever.

Golab is the Author of The Consumer's Guide to Planning Your Retirement: Your Guide to Mental Peace and Financial Well Being. Matt Golab continues to expand the geographic reach of his audience and desires to bring his expertise to a nationwide television audience. Matt emphatically states his mission, “I want to change the way Americans view their retirement. They can succeed (stay retired) regardless of what happens in the market".

Contact information for Matt is available at his website, http://www.aaronmatthewsfinancial.com/

Investment Advisory Services offered through Global Financial Private Capital, LLC, an SEC Registered Investment Advisor.

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