Don‚t Miss The Opportunity
After three and a half long years, it appears that the secular bear market that followed a secular bull market is over. Most Americans are a little wiser, a little grayer and a lot less exuberant. So are most advisors.
But if the late 1990s seem to be more than a decade ago, the pre-September 11 world seems much further away than that.
Most signs are now pointing to an improving economy, with indicators like productivity, corporate profits and the stock market revealing that a surprisingly strong economic rebound probably is underway. For the moment, the surge in productivity has been a double-edged sword as employers used the last recession as a reason to learn to do more with less.
That‚s the primary reason that corporate profits for the third quarter are returning to normal levels. If the revenue line picks up in corporate America, employers potentially could find themselves understaffed, triggering a hiring binge that would take the unemployment rate under 6%. If all this sounds overly optimistic, it‚s important to remember that inventories are at their lowest levels in history, and that the vast majority of macroeconomic turnarounds are caused by inventory reversals.
A recovering economy may not translate into a bull market of the kind we‚ve come to know in the last decade. After all, multiples are still fairly high, the market has come a long way very quickly since March, and the world is a different place than it was four years ago.
Speaking in Chicago at our 6th Annual Financial Advisor Symposium in September, contributing writer Nick Murray compared today‚s era with the end of the last severe bear market in the 1970s. Though the mid-1970s were one of the greatest times to invest in modern history, it sure didn‚t feel that way then. A bull market was beginning in starts, fits and head fakes, but many observers thought it was just a precursor to a return to the 1973-74 bear market.
But only part of the opportunity for advisors lies in the cyclical state of the markets, Murray told the more than 1,100 attendees. The demographic tidal wave means that every year from now until 2019, millions of baby boomers will turn 55 years old. Any advisor worth his salt should be able to sit down for 30 minutes with a 55-year-old, go over his financial balance sheet and income statement and estimate roughly how much more money he will need to save to enjoy a comfortable retirement. That eye-opening experience should cause him to get financial planning religion pretty quickly.
In this month‚s issue, yours truly takes a look at what‚s happened at the FPA in the nearly four years since that association was formed. Though I consider more than a few people active in the FPA to be friends (after covering this profession for almost 14 years), it‚s important to take a hard look at the leading association in the business. On the surface, the merger has gone remarkably smoothly. Beneath the surface, they face incredible opportunities, along with the challenges that one expects when two organizations are combined. Some of you may find the piece a little too "inside baseball." Others may not. Above all, I‚ve tried to be fair.
Evan Simonoff, Editor-in-Chief
P.S. It is with pleasure that we report that a March 2002 article, "Fool Me Twice, Shame On Me," by Cliff Asness has been named a 2003 article award winner by the CFP Board.