Dow Flirts With 17,000, but Most People Missed the Ride

  • By Charles Passy, MarketWatch
  • July 03, 2014

Still, many financial experts say that there’s a reason why the good news doesn’t quite register in the minds of consumers and investors. Call it the Great Disconnect that has followed in the wake of the Great Recession. And it’s a story that experts say can be told in one sobering statistic after another.

Begin with income. On the one hand, wages have basically kept pace with inflation in recent years. But on the other, unemployment and underemployment have affected overall household income to the point that there’s been about a 6 percent dip since March 2009 to the current median figure of $52,959 (after adjusting for inflation), according to Sentier Research, which tracks income. “It’s not a pretty picture,” says Sentier principal John Coder.

And what about expenses? While the Bureau of Labor Statistics may say prices are in check, some consumer watchdogs say what applies to overall prices may not apply to some key expense categories.

Consider the cost of fuel: A gallon of gas went from $2.40 in 2009 to $3.57 in 2013, according to the U.S. Energy Information Administration. Or medical care: The employee’s share of annual premiums for family coverage has increased from $2,412 in 2003 to $4,565 in 2013, according to the Kaiser Family Foundation. Or even a pound of bacon: In just the past year, the price in U.S. cities has increased by 16.4 percent to $5.69, according to the Bureau of Labor Statistics.

But what about stock market returns offsetting some of this economic stress? The relatively good news on the 401(k) side — at least as reported by Vanguard — does not necessarily jibe with the broader reality that many financial advisers say they’re seeing. They say they’re meeting with many first-time clients who have withdrawn large sums from IRA or traditional brokerage accounts during the past few years and have paid the price in missed returns as a result. “Almost everyone coming in to me today has tons of cash,” says Lee Munson, founder of Portfolio LLC, a New Mexico-based investment firm.

And there’s some data to back up those adviser claims: In the five-year period through January 2014, the Investment Company Institute reports, outflows from equity mutual funds outpaced inflows in 30 out of the 60 months — meaning money was being withdrawn from the market at a fairly significant rate.

Of course, at one time, “going to cash” wasn’t so bad. In fact, it’s the way a generation of retirees saw themselves through their golden years, living off CDs and other fixed-income investments that paid respectable yields. But therein lies what many financial experts say is the greatest cause for concern over the past several years. A little more than a decade ago, the interest rate on a five-year CD was well above 5%, according to; today, savers are lucky if they can get 2%.

It’s a sea change that has shaken the traditional model of retirement planning, says Greg McBride, senior financial analyst of “The sharp reversal in interest rates has dramatically cut the buying power of retirees and anyone else dependent on a fixed income,” he says.

Still, McBride says that if someone saving for retirement was smart enough to stick with stocks through the past five years, they may be OK, other economic factors aside. But McBride is just not sure how many investors had the wisdom to do so. “The train may be back at the top of the mountain,” says McBride, “but you’re not there unless you stayed on the train.”

Charles Passy covers personal finance, consumer spending and all things food and drink for MarketWatch in New York. Follow him on Twitter @CharlesPassy. This article originally appeared on and is reprinted by permission from, ©2014 Dow Jones Co. Inc. All rights reserved.

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