31 May 2018 FT — Articles to Read

31 May 2018

Question: According to MSN:Money, what are 5 critical moves to make before your 40s are over?

OECD bullish on global growth but warns of looming risks – Pg. 2

  • The global economy is still set to strengthen this year, but risks are looming and growth is increasingly reliant on support form governments
  • It trmmmed its previous forecast for global growth in 2018, from 3.9% to 3.8%, to reflect the soft patch in the Eurozone and Japan in particular, but is still expected growth to tick up to 3.9% in 2019
  • …cut unemployment across the OECD to its lowest level since 1980, igniting wage growth and leading to nascent labour shortages in Germany, Japan, the US and elsewhere
  • Other risks are more immediate. The EECD acknowledged that the disappointing first quarter was not only a matter of one-off strikes or extreme winter weather.  It said fears of disruption to trade could already have led companies to postpone investments, while higher oil prices could have filtered through to cramp consumer spending

Company investment data signal rate rises – Pg. 4

  • Strengthening investment by businesses helped sustain steady overall economic growth in the first quarter, countering a weak showing by American consumers and leaving the US Federal Reserve on track for further increases in interest rates
  • The figures contributed to overall GDP growth of 2.2% in the opening quarter of the year, marginally weaker than the 2.3% previously reported for the period
  • The GDP numbers revealed further weakness in household spending, with consumers increasing outlays at an annual 1% pace, far short of the 4% growth seen at the end of last year

Surging dollar poses profit challenge for US blue-chips – Pg. 19

  • The dollar has gained more than 7% against the euro since the single currency peaked at $1.25 in early February. As the political crisis in Italy has deepened this week the euro fell below $1.15 – its lowest level since July 2017
  • “A rising US dollar translates into a negative currency headwind for so many of the companies in the S&P 500”
  • A surge in US corporate profit growth in the wake of tax cuts, estimated at about 25% year on year, has failed to drive the S&P 500 back to its record peak set in late January
  • The S&P 500 US Revenue Exposure index, which measures the performance of companies in the index with higher than average revenue exposure to the US, is down for the year, whereas an index that measures companies with a higher than average revenue exposure outside the US is up almost 3%
  • The dollar’s ascent helps to explain why the shares of small companies, which tend to generate most of their revenue at home, have outperformed the S&P 500
  • The domestic focus also insulates small-caps from the trade tensions that have emerged this year and makes them a bigger beneficiary of cuts in the corporate tax rate and a stronger economy

Answer: (1) Save to avoid a retirement emergency (Prof Note: Get rich slowly.  If an unexpected expense results disallowing saving, “Do the hustle!”); (2) Prioritize retirement over college (Prof Note: I do not have children BUT I believe your children will be better served if the parents are financially stable in retirement.  Remember children are better able to shoulder the debt given the future years of work.  Also, the payment of college could occur upon your death.); (3) Prepare for the worst (Prof Note: I am always stress-testing my portfolio.  I know exactly how many years I can go prior to eating into principal.); (4) Invest, even if you think you can’t (Prof Note: It is always possible to pull the belt tighter!); (5) Think – and talk – about end of life (Prof Note: Holy Cow…YES!!!; Everyone needs an estate plan which includes Wills, PoAs, Living Will(s), etc.  The more information provided to heirs, the less pain they will suffer at your passing.)