I am optimistic about the future of the Stock Market for the next decade. While many forecast doom and gloom I see a possible run up in the market which could be very similar to the late 1990’s. There are several factors pointing to this scenario which I see combining into a “Perfect Storm”.
1. Baby boomers must quickly begin to save for retirement.
The Baby boomers have been negligent in saving for retirement despite their high incomes. They have lived beyond their means and put off saving for their future. The median amount of savings earmarked for retirement is aprox. 50-60K, at some point in the not too distant future they will have to face facts and begin saving. The most likely vehicle will be to “max out “there 401K. These monies will most likely be invested in growth funds hoping to make the most of the short time they have left.
2. 401 K’s effect on the Stock market
The run up in the Stock market between 1975 and 2000 can, in large part, be traced to the funds being funneled into Stocks via Mutual Funds in workers 401K accounts. Although most workers contributed relatively little to these accounts (3-4% on average) the constant inflow of funds helped the market produce impressive returns. Those returns generated attention by people who would not normally invest in stocks, and investment in the market increased until it reached a fevered pace in the late 1990’s. Then came the inevitable correction in 2002, since the bottoming of the market in 2002 the Market has shown steady progress from the low 9000’s to a present level of 10500. Funds have still been flowing into the market thru 401K’s although, the market has had a much smaller piece of the pie with more funds going to bonds and money markets with relatively dismal returns.
3. Increased productivity due to technology
In the go-go 90’s the promise of technology was almost intoxicating. It seamed as if new technologies were being developed daily and the future was going to be a wonderful place where machines did our work and we would all be free to enjoy our new found, easily gained wealth. Then came the reality check. By 2003 people were saying technology is dead. Somewhere in the middle ground is where the actual truth lies. Technology is far from dead and is steadily increasing corporate productivity and profits. The promise of technology to create new products and markets worldwide is alive and well.
1. Baby boomers must quickly begin to save for retirement.
The Baby boomers have been negligent in saving for retirement despite their high incomes. They have lived beyond their means and put off saving for their future. The median amount of savings earmarked for retirement is aprox. 50-60K, at some point in the not too distant future they will have to face facts and begin saving. The most likely vehicle will be to “max out “there 401K. These monies will most likely be invested in growth funds hoping to make the most of the short time they have left.
2. 401 K’s effect on the Stock market
The run up in the Stock market between 1975 and 2000 can, in large part, be traced to the funds being funneled into Stocks via Mutual Funds in workers 401K accounts. Although most workers contributed relatively little to these accounts (3-4% on average) the constant inflow of funds helped the market produce impressive returns. Those returns generated attention by people who would not normally invest in stocks, and investment in the market increased until it reached a fevered pace in the late 1990’s. Then came the inevitable correction in 2002, since the bottoming of the market in 2002 the Market has shown steady progress from the low 9000’s to a present level of 10500. Funds have still been flowing into the market thru 401K’s although, the market has had a much smaller piece of the pie with more funds going to bonds and money markets with relatively dismal returns.
3. Increased productivity due to technology
In the go-go 90’s the promise of technology was almost intoxicating. It seamed as if new technologies were being developed daily and the future was going to be a wonderful place where machines did our work and we would all be free to enjoy our new found, easily gained wealth. Then came the reality check. By 2003 people were saying technology is dead. Somewhere in the middle ground is where the actual truth lies. Technology is far from dead and is steadily increasing corporate productivity and profits. The promise of technology to create new products and markets worldwide is alive and well.
