BALLOT BOX MANDATES
Can the Republicans and Democrats move to the center after midterm elections? While a divided government will not change the outlook for the stock market, it could pose challenges for further market and economic recovery, says Robert C. Doll, chief equity strategist for fundamental equities at BlackRock. "If the current government is not able to come together and address the serious economic problems facing the country, these problems will almost certainly escalate," Doll wrote in an election-day report. Indeed, nearly half of financial advisors polled by the SEI Advisor Network reported the midterm elections had created "fear and uncertainty" among their clients. Continued unemployment, the potential for a double-dip recession, pending tax changes and budget deficits were the biggest issues impacting investors, according to the study, which polled 238 financial advisors during the two weeks before the elections.
MENDING GLASS HOUSES
When the Federal Housing Tax Credit, which extended an $8,000 benefit to first-time homebuyers, expired in April, it seemed like a surge in housing sales would be fleeting. Housing sales and new residential building increased 16% and 8.5%, respectively, between the beginning of March and the end of April. After the tax credit expired, however, housing sales dropped 34% by July, and new residential construction dropped almost 8.5% by July. For all of the ups and downs in sales and construction, however, recent residential real estate price trends point to more stable fundamentals, Milton Ezrati, senior economist and market strategist for Jersey City-based Lord Abbett wrote in a recent commentary. From January through April, the prices of existing homes rose steadily, about 4.4%. Between April and July, sales were up 5.6%.
A MODEST PROPOSAL
A recent survey by the ING Retirement Research Institute shows that retirement plan participants lack a clear understanding of contribution rates and the lifetime value of even small increases. ING and Matthew Greenwald surveyed 1,000 workers currently participating in an employer-sponsored retirement plan. Nearly two-thirds (65%) determined their contribution rate themselves, and one in five (21%) said they "go by gut feeling." When asked to estimate the lifetime value of a 2% increase in their contribution rate, only a small percentage could even come close. "After choosing to participate in the plan, the most important decision workers make is setting their contribution rate each year," said Catherine Smith, CEO, ING U.S. retirement services. "However, for too many, participation and contribution rate elections are just another box to check."