One of the toughest, specifically, for new retirees. There may have been harder markets to navigate, I imagine the late 1920’s, and what came after that, or the early 70’s may be on the list ( I missed those market routs) but right now this market is getting tougher to figure out (it is starting to feel too easy and that’s the problem). Having just heard Warren Buffet’s letter to shareholders (he has seen most market cycles!) his mantra that the future looks bright for long term investors in US stocks should stoke more optimism in the short run as well. As a recap, for the decade just passed, large cap stocks have averaged a 14.3% return leading the pack of assets while delivering a 31.7% gain in 2019 and 21.7% return in 2020. Small cap stocks have averaged 10.9% over the same decade. In both categories growth has outpaced value again. Ten year treasury bonds delivered a 4% return the past ten years, now junk bonds are yielding 4%. As interest rates have churned lower and lower each year for at least the past decade now, it is getting increasingly harder to imagine both stocks and bonds outperforming in your retirement portfolio in the next few years. The ten year treasury now hovers just below 1.5% and this helps to overvalue stocks as market’s flourish in low rate environments. So you have a choice to make as a newly retired investor, spend a bit less for now (the obvious but boring choice), or go on the hunt for income alternatives that will substitute for treasuries while holding on to highly overvalued stocks for dear life. When it comes to the fixed income portion of your portfolio, and the hunt for alternatives, the devil lies in the details. Firms are scrambling to invent products with happy sounding names like ‘buffer funds’, ‘market hedging’ strategies, ‘mortgage-backed’ bank loans, ‘long/short’ funds, ‘life settlements’ and many more (let’s not forget to mention equity-income annuities…can’t go down, can only go up the happy insurance salesman will tell you!) Yes, some of these products will in fact outperform for a period of time, but the cost to hold them year-in-and-year-out will be extremely high (many start at 2%-3% a year and go up from there). Some suggest that utility and preferred stocks are decent income alternatives to treasuries, and they are…until they aren’t. Everything has a shelf life once cycles shift. Right now we are nearing the end of a very long cycle that is wearing income investors out with the Federal Reserve pledging to keep interest rates low for….ever? Sooner or later the towel is being tossed into the ring one investor after another as the past now becomes forever in their minds as the low interest rates are wearing them out. Many parts of the stock market are acting badly as new highs are hit. SPAC’s (a cross between a hedge fund and venture capital) are everywhere and there is rampant speculation with short term- minded trading becoming the new norm all of which will lead to extreme volatility. Cathie Wood, of Ark ETF fame, is the new superstar fund manager (she simply plows an overweighting of Tesla and a few other momentum stocks into each fund and stays very concentrated). The idea behind hers, and other copycat funds, is to invest only in the stocks that are going up. Right now that seems plausible as the market has been dominated by a handful of stocks. The other big buzz on the street is bitcoin as it tops $50,000 per coin. There is even talk of bitcoin being the new bond proxy as many corporations are investing their spare cash on the balance sheet into bitcoin in place of cash and bonds. Huh? If you are going to buy a stock in this market, be sure to protect the downside with a stop order. If you are a mutual fund investor, be prepared to rebalance. There is LOADS of stimulus/covid relief/handout money coming soon so another burst of liquidity should increase the speculation and this party should carry on for the foreseeable future. This is all great news if you’re a kid investing for the first time on your phone, but increasingly stressful if you’re a newly retired investor. Is this all just the new norm when it comes to investing? Has MMT as an economic policy simply been an undiscovered/unused panacea for growth? Perhaps, but you can be sure that investment cycles will change and what was old will likely become new again. I believe many investment changes that are done now to increase income will probably need to be undone in the years ahead. At what cost is what you need to ask yourself right now. Beware the words alternative income when it is being sold to you for retirement income because reaching for higher yields now may end up costing you multiple times that interest income in lost principal as investors never sell at the top…they just don’t. As for the guy or gal selling you the product? ‘Well, it sure looked good at the time’ will be the retort. Try and stay patient and careful now as FOMO rules the day.