Day: October 9, 2024

The recent surge in Chinese stocks hit the pause button on Tuesday after Beijing failed to roll out another large stimulus package, a surprise to investors hoping to add more fuel to the unprecedented rally.

Hong Kong’s benchmark Hang Seng Index (^HSI), which is loaded with large Chinese stocks, dropped around 9% on Tuesday, its worst day since October 2008, after climbing around 20% over the past month on the heels of China unleashing its most aggressive monetary stimulus since the pandemic.

China’s benchmark CSI 300 (000300.SS) also experienced a volatile day as expectations of a large stimulus announcement fueled an initial 10% rise after markets reopened from the country’s weeklong holiday. The index later gave up those gains, finishing the day up a more modest 6%.

The stimulus, an effort by China to course-correct its struggling economy, was first announced on Sept. 24. Since then, a surge of inflows has dramatically boosted Chinese equities, particularly in real estate and consumer staples, as investors bet on Beijing’s comeback.

But Wall Street remains split on whether or not now is the right time to buy into the market.

“The short-run pop [signals that] people are feeling better,” Jeremy Schwartz, chief investment officer at WisdomTree, told Yahoo Finance’s Market Domination. “Will it be enough to move their economy? That’s very much an open question [because] the sentiment was so, so negative.”

The stimulus, which includes interest rate cuts, lower reserve requirements for banks, liquidity for the stock market, and mortgage relief, among other measures, comes as the nation’s second-largest economy attempts to pull itself out of a long slump spurred by deflationary pressures from a sluggish property market and weak domestic demand.

At a press conference on Tuesday hosted by China’s top economic planner, the National Development and Reform Commission (NDRC), Beijing said it’s committed to enacting further support in order to reach its economic goals, which include an annual growth target of “around 5%.”

“We are fully confident in achieving the annual economic and social development targets,” Zheng Shanjie, chairman of the NDRC, told reporters. However, he did acknowledge that the Chinese economy is facing a “more complex and extreme” global environment.

At the press conference, the NDRC announced it would issue 200 billion yuan ($28 billion) to local governments for spending and investment projects by year’s end. But economists have been waiting for a fiscal package worth around 2 trillion yuan ($284 billion) to be announced.

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On Tuesday, other Chinese-listed exchanges and companies were also on the move. The Shanghai Composite (000888.SS), a key indicator of the overall performance of the Chinese stock market, eked out gains of around 5% after initially opening the day higher. The index has rallied by double digits, jumping more than 20% from its September lows. It’s up about 30% over the past month.

Similarly, shares of Chinese e-commerce giants like Alibaba (BABA) and PDD Holdings (PDD) have surged over that same period, up more than 35% and 55%, respectively, despite single-digit losses on Tuesday.

WisdomTree’s Schwartz said investing in the region depends on whether or not traders can afford to be “nimble” and “move in and out” of the market depending on the level of risk.

“For strategic, long-term investors, it’s tricky,” he said, noting that a “very dicey” geopolitical environment, coupled with the upcoming US election, further complicates the investment thesis.

“The ultimate question is: Are you going to be rewarded to be in China as a communist country and all of the other problems with the geopolitics, versus the democratic countries like Japan and India that are more US allies versus US adversaries at the moment?” he said.

Others say it’s only the start of China’s recovery and now could be the time to reassess.

“We’re really in the very, very early innings,” Brendan Ahern, CIO at KraneShares, told Yahoo Finance’s Morning Brief. “And then you have the high probability of better news coming. Instead of looking through the rearview mirror, let’s look through the windshield.”

‘If not now, when?’

Goldman Sachs added to bullish commentary in a note on Monday titled “China strategy: if not now, when?” The team, led by analyst Kinger Lau, upgraded China stocks to Overweight from Marketweight and argued for potential upside between 15% and 20% for both the MSCI China Index (2801.HK) and CSI 300 Index.

Other big banks, including HSBC Holdings and BlackRock, also upgraded mainland Chinese stocks in recent days, building on expectations that the rally still has more room to run.

“Many China watchers may have suffered ‘policy fatigue’ over the past 1 to 2 years, with the policy delivery in the post Covid-era generally being perceived as underwhelming,” Goldman Sachs wrote in its report. “Given low market expectations, the latest easing package has positively surprised investors and altered the policy narrative along a few dimensions.”

The analyst team added, “More stimulus is probably needed to turn things around, but the profit outlook [for Chinese companies] has moderately improved,” with valuations still below historic averages amid depressed stock prices.

“Even if the rally falters, [Chinese equities] still have a place in investor portfolios,” the report read.

As investors look ahead to the next possible catalyst for Chinese stocks, analysts say positive momentum will likely hinge on the magnitude and execution of more fiscal policy, rather than just monetary support.

“A well-targeted fiscal stimulus, aimed at rejuvenating the property sector and reviving animal spirits, could significantly improve China’s economic prospects, potentially generating positive spillovers for the global economy,” Seema Shah, chief global strategist at Principal Asset Management, wrote in a note on Monday.

“While investors have reason for cautious optimism, much will depend on the size and implementation of the various measures, details of which are still pending.”

Alexandra Canal is a Senior Reporter at Yahoo Finance. Follow her on X @allie_canal, LinkedIn, and email her at alexandra.canal@yahoofinance.com.

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America’s national debt is spiraling out of control, and Tesla CEO Elon Musk isn’t shy about sounding the alarm.

At the All-In Summit, hosted by the “All-In Podcast,” Musk pulled no punches. “America is going bankrupt extremely quickly,” he warned, “and everyone seems to be whistling past the graveyard on this one.” It’s not the first time Musk has expressed his concerns.

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This past July, he highlighted a headline that screamed, “Interest Payments on U.S. National Debt Will Shatter $1,140,000,000,000 This Year – Eating 76% of All Income Taxes Collected.”

Musk added his usual blunt commentary: “America is going bankrupt btw.”

His warnings are backed up by cold, hard facts. The U.S. national debt is now at a staggering $35.3 trillion and climbing fast. The root of the problem is a growing deficit that shows no signs of slowing down.

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In fiscal year 2024, the government spent a jaw-dropping $1.9 trillion more than it collected. Musk pointed out that annual interest payments on the debt have crossed $1 trillion, and he didn’t mince words when he said, “We’re adding a trillion dollars to our debt, which our kids and grandkids are going to have to pay somehow.”

If the debt keeps growing at this pace, Musk warns the country will be trapped in a vicious cycle where “the only thing we’ll be able to pay is interest.”

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The real fear, Musk says, is that at some point, “the only thing we’ll be able to pay is interest.” But can a country like the U.S. go bankrupt? It’s complicated. Governments can’t file for bankruptcy the way companies do. Technically, they can keep borrowing as long as there are buyers for their bonds.

The real risk, though, lies in inflation and economic instability. If the government prints more money to cover its debts, the dollar’s value could plummet, leaving Americans with the short end of the stick.

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As the co-hosts of the “Words & Numbers” podcast put it, “Technically, the government can’t go bankrupt, but it can print enough money to make dollars nearly worthless.”

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The economic consequences are clear.

According to the Peter G. Peterson Foundation, rising debt crowds out investments in the public sector and economic growth. Confidence in the government’s ability to repay its debt diminishes and private investment takes a hit.

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Former President Donald Trump has noticed the issue, too. And in typical Trump fashion, he has a bold solution – bring in Elon Musk. At a rally in Walker, Michigan, Trump told supporters, “I’m going to get Elon, and he’s going to be our cost-cutter. I think he can save trillions.”

Though Trump admits Musk probably won’t be able to commit full-time due to his many ventures – rockets, electric cars, brain interfaces – he’s confident Musk’s efficiency could change the game. And with a net worth of $270 billion, Trump assured the crowd, “He’s going to do it for zero. He doesn’t want anything.”

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Musk seems open to the idea, too. In a post on X (formerly Twitter), Musk said he would serve without pay, title, or recognition if the opportunity arose.

The billionaire likened the U.S. fiscal situation to someone with too much credit card debt. He warned that the consequences could be severe if the country doesn’t curb its spending. Supporting Trump’s bid for the presidency, Musk sees a potential “once in a lifetime” chance to reduce government size and eliminate waste.

With Musk’s history of cutting costs – such as slashing Twitter’s workforce by 80% after acquiring the company – Trump is betting that this “cost-cutter” approach could reshape the government. He told supporters that Musk’s potential role wouldn’t hurt anyone but would target “waste, fraud and abuse.”

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Someone with $1.5 million in assets on top of Social Security income may be able to maintain a comfortable retirement starting at 65 with the right circumstances. While this is can be a relatively strong retirement profile depending on your needs, location and risk tolerance, you’ll need to plan carefully and make some critical decisions surrounding Social Security, your investments and spending. If you need additional help deciding whether you can afford to retire, consider speaking with a financial advisor.

Calculate Your Social Security Benefit

First, you’ll need to determine how much your Social Security benefits will be if you retire immediately at 65.

For someone born in 1958, the full retirement age is 66 years and 8 months. At age 65, you’d be collecting benefits 20 months early, which reduces your lifetime payments by 11.11%. For example, say you would have received the average payment of $1,759 per month or $21,108 per year at full retirement age. At age 65, you would instead receive $1,563 per month or $18,762 per year. Maximum benefits can pay up to $4,555 per month in 2023 if you wait until age 70 to begin collecting.

Your exact benefits depend on how many Social Security credits you earned while working. If possible, it would be wise to wait on collecting until full retirement age or later so that you can maximize your benefits. A financial advisor can help you determine when to start collecting Social Security.

Build an Income Plan

The next step is planning for other income. How much money can you generate from your combined savings, benefits and other assets?

First and foremost,if you have half a million dollars sitting in a low- or no-interest depository account, it’s likely not keeping up with inflation. You can do better.

Many investment pathways have a good chance of beating inflation so you don’t lose purchasing power to inflation over time. A financial advisor can help you create the right portfolio, as well as suggest other potential routes to sustainable financial health.

“Some of the excess $500,000 cash could be used to purchase permanent life insurance as this would provide a guaranteed tax-free death benefit,” said Bryan M. Kuderna, founder of the Kuderna Financial Team. “This might act as a ‘permission slip’ to spend down retirement assets and enjoy Social Security without disinheriting heirs and replenishing a lost Social Security check upon first spouse’s demise.”

Otherwise, the question is how to balance your income and risks. Depending on your spending and expenses, you should be able to generate enough income throughout retirement, but the scope of that income will depend on how you invest.

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Before you restructure any investments, remember to consider required minimum distributions and withdrawal taxes, Kundera warns. “IRA distributions are reportable as taxable income, and as such, can push the IRA owner into higher tax brackets,” he said.

To understand different investment options, we can look at four possible alternatives for the $500,000 cash:

Option 1: Keep it in Cash

Say you keep everything in cash or cash equivalents. With $1.5 million in the bank, you can withdraw $50,000 per year for 30 years.

This is the weakest option. Coupled with even a mid-range Social Security income, this would likely be enough to live comfortably in most parts of the country, but not all.

Option 2: Invest in Bonds

The average interest rate on an Aaa corporate bond moves between 4% and 5%. With a 4% annual interest rate, a $1.5 million portfolio invested 100% in bonds could generate $60,000 per year without drawing down on the principal.

Option 3: Buy an Annuity

Annuities are often preferred by investors who want a mix of bond security and market payouts. A $500,000 annuity purchase could get you around $3,000 per month for life.

Option 4: Invest in a Balanced Portfolio

The S&P 500 has an average annual return of about 10%. Investing your entire $1.5 nest egg into the S&P 500 could produce approximately $150,000 in average annual income. That is, when the market meets its average return. There are years where the stock market suffers significant losses, including 2022 when the S&P 500 was down nearly 20%. Due to this risk, many retirees choose to have a more conservative portfolio, like a 60/40 portfolio.

Consider Your Spending

The combination of this income and however you structure it may be enough to retire on now at 65, but that depends entirely on your zip code, personal definition of comfort and any special circumstances.

Among other spending considerations, make sure to account for:

• Known healthcare issues

• Lifestyle and luxuries

• Hobbies and travel

• Bills and monthly spending

• Gap and long-term care insurance

• Housing in your community

• Emergency funds

The last is important. When you live on a fixed income, it’s important to build financial flexibility for unexpected expenses. Whether this is as mundane as car repairs or as urgent as medical needs, keep a fund set aside for unexpected spending. Otherwise, you may find yourself reaching for money that isn’t there. A financial advisor can help you build a retirement budget based on your expenses and assets.

Bottom Line

You should be able to afford to retire comfortably with $1.5 million in assets, but be careful. While this is a lot of money, you’ll need a plan in place to ensure your assets can support your income needs and spending habits.

Retirement Planning Tips

• Emergency funds are critical, especially for retirees who can’t generate new income. Fortunately, it’s not as hard to build one as you might think.

• A financial advisor can help you build a comprehensive retirement plan. Finding a financial advisor doesn’t have to be hard. SmartAsset’s free tool matches you with up to three vetted financial advisors who serve your area, and you can have a free introductory call with your advisor matches to decide which one you feel is right for you. If you’re ready to find an advisor who can help you achieve your financial goals, get started now.

• Keep an emergency fund on hand in case you run into unexpected expenses. An emergency fund should be liquid — in an account that isn’t at risk of significant fluctuation like the stock market. The tradeoff is that the value of liquid cash can be eroded by inflation. But a high-interest account allows you to earn compound interest. Compare savings accounts from these banks.

• Are you a financial advisor looking to grow your business? SmartAsset AMP helps advisors connect with leads and offers marketing automation solutions so you can spend more time making conversions. Learn more about SmartAsset AMP.

Photo credit: ©iStock.com/JLco – Julia Amaral, ©iStock.com/RossHelen, ©iStock.com/Abdullah Durmaz

The post I’m 65 Years Old, Have $500k in Cash, $1 Million in an IRA and Social Security. Should I Retire Now? appeared first on SmartReads by SmartAsset.

(Bloomberg) — The world’s largest technology companies drove stocks higher, with the market rebounding from its worst session in a month. A rout in Treasuries eased as bets on Federal Reserve rate cuts stabilized. Oil sank.

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Equities closed within a striking distance of their all-time highs, with the S&P 500 up 1%. Chipmakers led gains on Tuesday as Nvidia Corp. extended a five-day rally to 14%. A Bloomberg gauge of the “Magnificent Seven” megacaps climbed 1.7%. Wall Street’s favorite volatility gauge — the VIX — dropped from its highest since August.

“We expect equities will ‘back and filling’ in October as the earnings season begins,” said Craig Johnson at Piper Sandler. “Investors should use ‘health’ pullbacks that confirm key support to add to positions.”

Traders also waded through remarks from US policymakers.

Fed Bank of Boston President Susan Collins noted that rate cuts should be careful and data-based. Her Atlanta counterpart Raphael Bostic said while risks to inflation have come down, threats to the labor market have risen, though the economy is still strong. Governor Adriana Kugler said officials should keep the focus on bringing inflation to target, with a “balanced approach” that avoids a slowdown in jobs.

“The US data is not so strong that the Federal Reserve’s contribution to the global rate-cutting cycle looks set to end,” said Mark Haefele at UBS Global Wealth Management. “We therefore maintain our conviction for investors to position for lower rates.”

The S&P 500 topped 5,750. Honeywell International Inc. gained on plans to spin off its advanced materials division. Energy stocks joined oil lower and US-listed Chinese stocks tumbled as Beijing stopped short of launching more major stimulus. Roblox Corp. dropped as Hindenburg Research said it’s betting against the gaming platform.

Treasury 10-year yields were little changed at 4.02%. A $58 billion sale of three-year Treasuries was soft. West Texas Intermediate crude fell 4.6% to $73.57 a barrel.

Mohamed El-Erian says the guessing game that’s taking place over the Fed’s path for monetary policy is creating market volatility.

“Markets are all over the place. In the last 15 days the probability of a 50 basis point cut in November has gone from over 60% to zero. November is next month,” El-Erian, the president of Queens’ College, Cambridge, told Bloomberg Television on Tuesday.

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“That is how much uncertainty there has been in this market. These are massive moves based on data points,” he added.

Billionaire investor Ray Dalio said he doesn’t anticipate the Fe making “significant cuts in rates,” and that bonds are a risky investment given recent fluctuations in Treasury markets.

“Treasury bonds have not been a great investment,” the Bridgewater Associates founder said Tuesday at the Greenwich Economic Forum. “We have an interest rate risk in that bond market.”

Yields have risen after a healthy decline and for now, this indicates the bond market is pricing in fewer rate cuts and not more, according to Michael Landsberg at Landsberg Bennett Private Wealth Management.

“Yields will likely stay range bound and even if they rise from here, they have plenty of upside room before rising yields start to negatively affect stock prices,” he said.

Corporate Highlights:

• Boeing Co. managed to hand over 33 aircraft to customers in September, when a strike shut down large parts of its manufacturing, while warning that the work stoppage at its main production hub in the Seattle area will reduce future deliveries.

• DocuSign Inc. climbed after S&P Dow Jones Indices said that the e-signature company will join the S&P Midcap 400 Index before trading opens on Oct. 11.

• PepsiCo Inc. reduced its revenue outlook, citing slower-than-expected growth and international unrest, but said cost cutting and greater efficiency will allow it to meet its profit goal.

• WW International Inc. said it would begin offering a copycat version of weight-loss drugs that costs far less than Novo Nordisk A/S’s Ozempic and Wegovy.

Key events this week:

• Fed minutes, Wednesday

• Fed’s Lorie Logan, Raphael Bostic, Austan Goolsbee and Mary Daly speak, Wednesday

• US CPI, initial jobless claims, Thursday

• Fed’s John Williams and Thomas Barkin speak, Thursday

• JPMorgan, Wells Fargo kick off earnings season for the big Wall Street banks, Friday

• US PPI, University of Michigan consumer sentiment, Friday

• Fed’s Lorie Logan, Austan Goolsbee and Michelle Bowman speak, Friday

Some of the main moves in markets:

Stocks

• The S&P 500 rose 1% as of 4 p.m. New York time

• The Nasdaq 100 rose 1.6%

• The Dow Jones Industrial Average rose 0.3%

• The MSCI World Index rose 0.4%

• Bloomberg Magnificent 7 Total Return Index rose 1.7%

• The Russell 2000 Index was little changed

Currencies

• The Bloomberg Dollar Spot Index was little changed

• The euro was little changed at $1.0978

• The British pound rose 0.1% to $1.3099

• The Japanese yen was little changed at 148.30 per dollar

Cryptocurrencies

• Bitcoin fell 1.4% to $62,114.69

• Ether fell 0.3% to $2,434.47

Bonds

• The yield on 10-year Treasuries was little changed at 4.02%

• Germany’s 10-year yield declined one basis point to 2.24%

• Britain’s 10-year yield declined two basis points to 4.18%

Commodities

• West Texas Intermediate crude fell 4.6% to $73.57 a barrel

• Spot gold fell 0.8% to $2,621.72 an ounce

This story was produced with the assistance of Bloomberg Automation.

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