2018 was a masterclass in headline dissonance as far as your money goes. The economy is supposedly strong and yet, particularly during December, the stock market was hammered, leading the biggest stock market indices to finish the year at a loss and helping to give rise to recession talk.
2019 also got off to a pessimistic start. Pretty much every story on the front page of the Wall Street Journal digital edition on Wednesday morning was negative, as the NYT’s Binyamin Appelbaum pointed out on Twitter with a well-timed screenshot. Though all the up-and-down is obviously confusing and very distressing if you have investments, it’s created an ideal backdrop for New Year’s resolutions of a financial variety: Right now there’s a good chance any retirement contributions you start making will stretch a little farther.
That’s because the stock market looks like it’s trading at a discount. The phrase ‘buying stocks at a discount’ is basically a hedged, jargony version of Wall Street’s oldest adage: Buy low, and sell high. The theory is that, the more a stock price falls, the more likely it is that you’re getting it for a discount or a fair price. And, particularly for younger investors who have a long time to save for retirement, there’s some evidence that may be happening in 2019.
Morningstar, a big financial intelligence house, says the outlook for global stocks is good in 2019. According to their calculations, the median stock is trading at around 14 percent lower than it should be if it were trading at its fair value. Oil stocks and technology stocks in particular, they write, appear to be a pretty good deal (at least historically).
Of course that’s just an estimate. But what it means is that the person who opens up a retirement account today, or ups their 401(k) contributions today, or puts a little money into the stock market today, etc., is getting a little bit of a two-er. They’re increasing their odds of a secure retirement, and increasing the odds that their investments appreciate more reliably. It’s not quite the same as if the “stuff you need to retire and stop working some day store” was having a 14 percent off sale, but it’s kind of close.
Finally, in the grand scheme of New Year’s Resolutions, changing your retirement account contributions is pretty easy. A single percentage point increase or two will be hardly noticeable as far as take-home pay, will cost you a lot less than a new gym membership, and is also way, way easier to accomplish with a hangover than anything involving physical activity.
So, regardless of your take on New Year’s resolutions, start your 2019 with some money stuff. No matter what the market does in 2019, your 50-years-from-now self will almost certainly thank you.