U.S. stock futures were higher in early morning trading on Tuesday following a major sell-off on Wall Street that resulted in the S&P 500′s worst day since May.
Dow Jones futures had jumped 370 points by 4.45 a.m. ET. S&P 500 futures and Nasdaq 100 futures both also traded in positive territory.
The major averages tumbled on Monday due to a confluence of concerns including the imminent Federal Reserve meeting, the lingering delta variant, potential economic disruption in China and the debt ceiling deadline.
However, stocks closed well off their lows of the day.
The S&P 500 slid 1.7% for its worst day since May 12 of this year. At it’s low of the day, the 500-stock average pulled back 5% on an intraday basis from its high. It currently sits 4.1% from its record.
The Dow Jones Industrial Average plummeted 614 points, or 1.8%, for its biggest one-day drop since July 19. The Nasdaq Composite dropped 2.2% as growth pockets of the market were some of the hardest hit.
The Federal Reserve begins its two-day policy meeting on Tuesday and investors are looking for more information from Chairman Jerome Powell about the central bank’s plans to taper its bond buying, specifically when that will happen. Powell said last month that he sees the Fed slowing its $120 billion in monthly purchases at some point this year.
The Fed releases its quarterly economic forecasts, the so-called dot plot, along with the statement on interest rates at 2 p.m. ET Wednesday. Powell will have a a press conference after.
″We’re going to have to see proof that the Fed dot plots don’t come out in a way that spooks the market,” said said Yung-Yu Ma, chief investment strategist at BMO Wealth Management.
Weakness in China’s equity market reverberated into U.S. stocks on Monday. The benchmark Hang Seng index plunged 4% as struggling real estate developer China Evergrande Group teeters on the brink of default.
“We’re going to have to see some proof that the Chinese government is taking steps to manage this,” added Ma.
The Delta variant remains a global health threat as the colder months approach and vaccination hesitancy persists among some Americans.
Stocks linked to global growth led losses on Monday and energy names took a hit thanks to a 2% drop in U.S. oil prices. Banks stops dropped as bond yields fell.
The Cboe Volatility index, Wall Street’s fear gauge, jumped above the 26 level on Monday, the highest since May.
Investors are also concerned about the deadline to raise the debt ceiling and possible tax increases. Congress returned to Washington from recess rushing to pass funding bills to avoid a government shutdown.
September is a historically volatile month for stocks and after the S&P 500′s 16% rally year-to-date, many investors have said the market is due for a pullback. Some strategists called Monday’s sell-off a buying opportunity.
“The market sell-off that escalated overnight we believe is primarily driven by technical selling flows ([commodity trading advisors] and option hedgers) in an environment of poor liquidity, and overreaction of discretionary traders to perceived risks,” Marko Kolanovic, JPMorgan chief global market strategist, said in a note Monday.
While others said volatility is likely to persist until some of the risks are resolved.
“We’re not in the camp that this small pullback represents a special buying opportunity,” said Ma. “There could easily be more volatility depending on what happens with the Fed meeting…similar with the debt ceiling. With the overhang and then negotiations, this is definitely going to be pushed to the wire.”
Cryptocurrencies also pulled back on Monday with bitcoin ending the day about 7% lower. The slide resurfaced the debate about whether bitcoin can or should serve as a safe-haven asset.
FedEx, Adobe, AutoZone and Stich Fix report quarterly earnings on Tuesday.
Feeling a little unsure about your ability to retire comfortably? You’re not alone.
For its 2021 retirement readiness research, the Insured Retirement Institute asked nearly 1,000 U.S. workers, ages 40 to 73, for their thoughts on just that. The survey indicates that many workers “are not confident in their retirement prospects.”
“Most have not saved enough to bridge the gap between what Social Security will provide and what their savings can generate, especially as so many plan to retire before full retirement age,” the institute notes.
The following concerns are keeping a majority of older workers up at night, according to the institute’s findings. Do any of them resonate with your own experiences?
Being able to recover from a market correction
Respondents who are confident in this aspect of their retirement preparation: 29%
Overall, only 29% of respondents said they will be able to bounce back financially after a downturn in the stock market. Interestingly, both the youngest (37%) and oldest (34%) age groups surveyed are the most confident about riding out a serious market correction.
The Insured Retirement Institute said this might be because younger workers (defined here as those ages 40 to 45) know they’ll have more time for their retirement accounts to recover and older ones (ages 67 to 73) tend to have less money in riskier investments.
A part-time job in your golden years can be a good hedge against market losses. A regular salary might mean you can withdraw less from your retirement account, giving your investments a chance to rebuild.
Having enough money for long-term care
Respondents who are confident in this aspect of their retirement preparation: 33%
There’s a good reason people fear this: The median cost of long-term care in the United States can range from $1,603 to $8,821 per month.
And Medicare does not cover long-term care. Medicaid, another government health insurance program, often covers it, but Medicaid is generally only available to people with low incomes.
Unless you bought long-term care insurance when you were younger, it is indeed possible to run through your savings to pay for such care.
Having enough money for medical expenses
Respondents who are confident in this aspect of their retirement preparation: 42%
Overall, 42% of those surveyed think they’ll have enough money for any medical care they’ll need in retirement. But they might not know that Medicare doesn’t cover everything — a fact that catches quite a few retirees off-guard when it’s time for things like hearing aids, routine vision care and most dental work.
It’s worth noting that only 24% of those aged 67 to 73 believe they’ll be able to cover all their own medical expenses. The other 76% of that cohort has likely been there, paid out of pocket for that.
Being well prepared for retirement
Respondents who are confident in this aspect of their retirement preparation: 43%
Overall, 67% of respondents wished they’d started saving for retirement sooner, and 65% wished they’d saved more.
One-third of respondents are currently saving less than 5% of their income, as opposed to the 10% to 15% recommended by many financial planners. The Insured Retirement Institute calls current savings rates “inadequate” for the task of keeping retirees afloat.
There’s a disconnect between the notions of “retirement” and “saving for retirement.” Only 4 in 10 have tried to calculate how much they should be setting aside right now in order to have enough money when they quit working.
Having enough retirement income
Respondents who are confident in this aspect of their retirement preparation: 44%
One-third of those surveyed plan to retire before age 65, which means they’ll get permanently reduced Social Security benefits. Not that Social Security was intended as a sole income source in retirement; in fact, the average monthly benefit among retired workers is just $1,559.
The survey points out that workers “may have [retirement] income expectations that are unrealistic.”
For example, 62% of those earning $30,000 to $75,000 a year say they expect retirement income of $45,000 or more a year. Since those workers will likely get $25,000 or less in Social Security benefits, they would need $20,000 a year from personal retirement savings to make up the difference. But as noted previously, many aren’t saving enough and some have no savings at all.
Having enough money to live independently
Respondents who are confident in this aspect of their retirement preparation: 44%
Overall, less than half (44%) of survey respondents believe they will have enough money to live independently in retirement. The number rises to 49% among the ages 56-to-61 cohort.
They have reason to be concerned: Of those who live to age 65, about 70% will need long-term care before they die, according to the U.S. Department of Health and Human Services. This care is usually for a relatively short amount of time – but as noted earlier, long-term care costs big bucks.
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With participant interactions shifting to digital channels, a new study finds that a majority of retirement plans are failing to deliver proactive guidance and many have made it more difficult to find the information users are seeking.
For instance, just 24% of retirement investors strongly agree that their provider offers proactive guidance and help, according to J.D. Power’s 2021 U.S. Retirement Plan Digital Satisfaction Study. Additionally, fewer than half of respondents (43%) found it very easy to locate the information they were looking for on their retirement plan websites and mobile apps.
The study, which was formerly known as the U.S. Retirement Plan Participant Satisfaction Study, was redesigned to focus on investor interaction with retirement plan digital channels. Fielded in May and June 2021, the results are based on the responses of 5,363 retirement plan participants, with satisfaction scores measured across information/content, navigation, speed and visual appeal.
Among the key findings of the study:
Proactive guidance is key to customer engagement, but few retirement plans deliver. Net Promoter Scores significantly increase by 51 points among participants when their retirement plan provides proactive guidance via digital channels. Participants who receive this guidance are also 25 percentage points more likely to keep their retirement assets with their current retirement plan provider or roll over to a separate IRA with that provider. Yet, despite these benefits and as noted above, just 24% of retirement plan investors say they strongly agree that their retirement plan provider offers proactive guidance and help.
Apps are key. Overall satisfaction with the mobile app experience is 69 points higher than for websites, yet only 35% of participants have downloaded their retirement plan provider’s app to their phone. By comparison, 52% of utility residential customers have downloaded their energy provider’s app.
Guidance and overall financial health. Retirement planning and savings can’t be done effectively in isolation from a participant’s other short- and long-term financial goals and needs. While more than half (58%) of plan participants generally consider themselves financial healthy, among those who are not—including the overextended, stressed and vulnerable—satisfaction scores are much lower for the value of the information and content provided. Here, J.D. Power suggests that providers need to do a better job of understanding participant needs and delivering more relevant digital content.
“Very often an individual’s first experience with investing happens within an employer-sponsored plan, giving these plan providers an inside track to build a relationship and retain and grow the participant’s assets long after they have separated from their current employer,” observes Mike Foy, senior director of wealth management intelligence at J.D. Power. “Many of these providers have invested significantly in developing digital content and tools to provide education and guidance, but if participants are unaware of those resources or can’t easily find or use them, it’s a huge, missed opportunity,” he says.
According to the findings, the top and lowest performers in the study were separated by nearly 100 points on a 1,000-point scale. Charles Schwab ranked highest in retirement plan digital satisfaction with a score of 725. Bank of America (formerly Merrill) ranked second with a score of 703 and AIG Retirement Services ranked third with a score of 699, followed by T. Rowe Price (698) and Fidelity (694).