Stuff To Know
July 3, 2018
Work or Retire Sign — Fishers, IN — Norwood Economics

He had a guy that seemed to be doing just fine with his investment portfolio. When asked if he’d ever had anyone do retirement planning for him, he paused and then repeated that this guy (that his brother had recommended) seemed to be doing okay with the investing.


Retirement planning is about much more than investing. Investing is what you do with your savings to earn a return. You save and earn a return on your savings in order to have sufficient funds to meet your spending goals in retirement. You can’t retire and continue to consume without a retirement income, such as social security and savings. You need savings in addition to social security because social security is designed to only replace about 40% of your income. While it is true that the more you earn on your savings the less you need to save, it is not true that you will have a successful retirement 100% of the time as long as you beat the S&P 500 index return. You need to also save enough. Retirement planning is, in part, about determining an adequate savings rate.


Retirement planning is about much more than saving at an appropriate rate and investing your savings in a manner that will maximize the probability of meeting your spending goals in retirement. Retirement planning is also about contingency planning. No one knows how their future will play out, not in any real detail. Do we meet our savings goal or is it derailed by the loss of a job, illness, a divorce? Effective retirement planning includes contingency planning: What if this happens? What if that? A good retirement plan is stress tested after the basic model is built. A good retirement plan is robust enough to withstand life’s little jokes.


I had a woman tell me that her 401(k) plan had added a Roth option. A Roth IRA allows for after-tax savings, tax-free accumulation and tax free distributions. A traditional IRA allows for pre-tax savings, tax-free accumulation and taxable distributions. Tax uncertainty (not knowing future income tax rates) argues for putting money into both a Roth and Traditional IRA. The woman asked me if she should invest in the new Roth option, or continue to put money into a target-dated fund. Of course, that isn’t the choice. The Roth option isn’t an investment; it is an account that holds money that can then be invested in the same options as in the traditional 401(k) account. IRAs and Roth IRAs are not investments; they are investment accounts, with certain tax characteristics, into which you can place savings with which to invest.


I had a man tell me he didn’t want to just use index funds because he didn’t want to put all of his eggs in one basket. Index funds are now ubiquitous and can range from passively tracking a concentrated basket of investments, to tracking a broad, highly diversified basket of investments. Presumably, he meant he didn’t want to only invest in low-cost, passively managed funds, but instead wanted to also invest in higher-cost, actively managed funds as well. However, the choice between using index funds and actively managed funds has nothing to do with diversification. It is very easy to build a properly diversified index fund portfolio if that is your goal. Index funds are not an asset class; they are a type of money management style.

Buying Companies on Sale is a Successful Strategy

By Christopher Norwood • May 19, 2025
Executive Summary The S&P 500 rose 5.3% last week to finish at 5,958.38 The Dow advanced 3.4% and the Nasdaq added 7.2% A falling VIX means investor confidence is increasing A 90-day pause in the trade war sent the S&P higher Earnings estimates are falling along with GDP growth forecasts Earnings and interest rates drive the stock market over the long run Investors are chasing performance Small business hiring plans and job openings haven’t improved Norwood Economics continues to look for good companies on sale The Stock Market

Trump Decides to Save Christmas

By Christopher Norwood • May 19, 2025
Executive Summary The S&P 500 fell 0.5%, to finish at 5,659.91 The Dow fell 0.3%, and the Nasdaq dropped 0.5% The 200-day moving average is the next resistance U.S. nominal GDP growth expected to slow significantly Bank of America shifts investment focus Norwood Economics already has exposure to gold for most clients Norwood Economics is overweight international stocks The risk of both higher unemployment and higher inflation has increased The Federal Reserve declined to lower the fed funds rate last week The Stock Market

Remain Diversified. Prepare for higher-than-normal volatility

By Christopher Norwood • May 5, 2025
Executive Summary The S&P 500 rose 2.9% last week to finish at 5,686.67 The Dow was up 3% last week, and the Nasdaq rose 3.4% The counter-trend rally is ongoing Investors are extremely bearish due to worries about the trade war Political prediction markets are back Exploding imports are not a sign of weakening demand The April jobs report was better than expected The Trade War continues Capital is flowing into international and emerging markets The US dollar will likely continue to weaken The Stock Market

Caution is the Watchword of the Day

By Christopher Norwood • April 28, 2025
Executive Summary The S&P 500 rose 4.6% last week and finished at 5,525.21 Dollar weakness is an unpleasant surprise Tariffs and the dollar's safe-haven status should have pushed the dollar higher The S&P managed to retake the 20-day moving average Investors are looking for a reason to buy Some strategists are advising to sell the bounce Negative supply shocks are bad for the economy Weakness in U.S. bonds, stocks, and the dollar has investors scared Data is beginning to point to an economic slowdown The Chicago Fed National Activity Index (CFNAI) is one of the most important and overlooked economic indicators The Stock Market The S&P 500 rose 4.6% last week and finished at 5,525.21. The Dow rose 2.5% and the Nasdaq gained 6.7%. The S&P’s gains were attributed to President Trump’s statements at a Tuesday press conference. He said that Chinese tariffs would come down, and he wouldn’t fire Fed Chairman Jerome Powell. The 10-year Treasury yield ended the week at 4.25%. The two-year Treasury yield finished at 3.79%. The dollar rebounded. The dollar index (DXY) ended the week at 99.587. It hit a 3-year low of 97.921 on Monday. The DXY has lost 9.6% since mid-January. Tariffs and the dollar's safe-haven status should have pushed the dollar higher, not lower. It is believed that foreigners are repatriating their money. America needs foreign capital. Interest rates will have to go higher to entice foreign capital to our shores if safe-haven status is lost.

Slower Growth and Higher Inflation

By Christopher Norwood • April 21, 2025
Executive Summary The S&P 500 fell 1.5% last week to finish at 5,282.70 Counter-trend bounce started on April 7th Counter-trend rallies are short and sharp Thursday was an inside day Any trade war announcements will lead to more volatility Uncertainty is high, and consumer confidence is low The Federal Reserve is focusing on inflation The Philly Fed and Empire State indices continue to rise Small business owners are raising prices to offset input costs The Stock Market is still in a downtrend The Stock Market

Expect the unexpected

By Christopher Norwood • April 14, 2025
Executive Summary The S&P 500 had its best weekly gain since 2023 due to the suspension of most tariffs The Trade War and tariffs have dominated stock market action Daily announcements on the tariff front have led to high volatility The market is still in a downtrend Tariffs will negatively affect the U.S. economy Rising prices will reduce consumer demand U.S. earnings estimates are coming down; currently $267 and falling Pay attention to what bond investors are thinking The weakening dollar fell to its lowest level since 2022 The U.S. needs foreign capital

Uncertainty is high. Don't Panic.

By Christopher Norwood • April 7, 2025
Executive Summary The S&P 500 fell 9.1% and ended the week at 5,074.08 Bond yields are declining as investors flee stocks CME FedWatch tool now forecasts 3 to 4 Fed funds cuts in 2025 Inflation is higher than the Fed’s target and trending in the wrong direction The Volatility Index (VIX) spiked on Friday. Investors are showing fear The Stock Market is due a bear market bounce The longer-term downtrend likely won't end until Trump’s Trade War ends Market strategists are raising the odds of a recession and reducing price targets The Fed has a dilemma. It doesn't have the tools to deal with rising inflation and slowing economic growth simultaneously

The economy is vulnerable to a declining stock market

By Christopher Norwood • March 31, 2025
Executive Summary The S&P 500 fell 1.5% and ended the week at 5,580.94 The energy & healthcare sectors are the leading gainers year to date The S&P early highs and late lows are a sign of market weakness The fixed income market is signaling higher for longer Mortgage rates seem high to younger home buyers Mortgage rates were higher from 1972-2002 Earnings & GDP growth estimates are coming down The stock market reflects the economy Consumer confidence plunged to a 12-year low The economy is vulnerable to a declining stock market

The Fed is leaving two rate cuts on the table for 2025

By Christopher Norwood • March 24, 2025
Executive Summary The S&P 500 rose 0.5% last week to finish at 5,667.56 breaking its four-week losing streak The uncertainty surrounding the trade war will weigh on the economy and capital markets for the foreseeable future. Economists and the public aren’t sure whether to worry about inflation, weakening economic growth, or both. The Summary of Economic Projections (SEP) signals two rate cuts and a higher year-end inflation number Invoking the Alien Enemies Act of 1798 will lead to higher prices U.S. stocks are the only asset class losing money in 2025 The Stock Market The S&P 500 rose 0.5% last week to 5,667.56. The Nasdaq rose 0.2% and the Dow was up 1.2%. The S&P broke a four-week losing streak. It was due for an oversold bounce. We wrote last week, “The S&P is primed to bounce this week, likely at least back to the 200-day moving average residing at 5,740.” The S&P did bounce but only reached 5,715.33 on Wednesday around 3 p.m. Fed Chairman Powell was speaking soothing words at the time to investors during his press conference following the Federal Reserve FOMC meeting. The S&P couldn’t build on Wednesday’s late gains though, although it did try.

Tariff Talk Creating Uncertainty

By Christopher Norwood • March 17, 2025
Executive Summary • The S&P 500 fell 2.3% last week to finish at 5,638.94 • The S&P is down 4.13% year-to-date • The Nasdaq fell into correction territory and is down 11.6% since mid-February • Market strategists are saying recession risk is rising • Tariffs hurt the economy • Consumers and small business owners are feeling the pinch • The NFIB Uncertainty Index rose to its second-highest level ever in February • The Trump administration is targeting a lower 10-year Treasury Yield • Interesting Charts below The Stock Market
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