Stocks Gain in May as Nasdaq Rebounds, S&P 500 Hits High

Equity markets worldwide rose for a fourth month, a rout in technology shares was erased and the Standard & Poor’s 500 Index reached a record in May as economic growth picked up and tensions between Ukraine and Russia eased.

The MSCI All-Country World Index jumped 1.8% and touched the highest level in more than six years. Emerging markets led gains in stocks as benchmark indexes in India, Russia, Hungary and Argentina jumped at least 8%. The S&P 500 added 2.1% as investors returned to technology stocks and sent Apple Inc. shares up 7.3%.

Forecasts for a rebound in U.S. growth in the second quarter and stimulus from central banks in Japan and Europe, along with higher-than-estimated corporate earnings, helped send the value of global shares to a record $64 trillion. Russia has pulled back most of its troops from the border with Ukraine, a U.S. defense official said on May 30, as government forces continued a campaign to wipe out separatist rebels.

“The market to some extent has built up expectations for a strong second half of the year,” Jim Russell, a senior equity strategist at U.S. Bank Wealth Management, which oversees $120 billion, said by phone from Minneapolis. “Many people entered May with Russia on their minds and with sluggish economic indicators on their minds, and it really hasn’t turned out that way.”

The S&P 500 climbed to an all-time high of 1,923.57 to end the month after shrugging off a report showing the U.S. economy contracted for the first time in three years during the first quarter. A pickup in receipts at retailers, stronger manufacturing and faster job growth indicate the first-quarter setback will prove temporary as pent-up demand is unleashed.

Adverse Weather

Federal Reserve policy makers said at their April meeting that the economy has strengthened after adverse weather took its toll. Central-bank stimulus has helped propel the S&P 500 higher by as much as 184% from its bear-market low in March 2009.

“I don’t think the market is trading irrationally right now, but a lot of people assume that given the bull market run we’ve seen, there should be a pullback,” Kevin Mahn, president and chief investment officer of Hennion & Walsh Asset Management in Parsippany, N.J., said in a phone interview. His firm oversees more than $600 million. “I point to the economic data that suggests I can make a more plausible argument for upside than a significant downside.”

Economic reports in the coming week include data on factory orders and car sales, as well as the government’s monthly payrolls report on June 6.

Tech Recovery

The S&P 500 has rebounded 5.9% since a selloff in small-cap and Internet shares spread to the broader market and dragged the gauge to a two-month low in April. The technology-heavy Nasdaq 100 Index climbed 4.3% in May to erase its declines during that period.

Netflix Inc. rallied 30% for the largest May gain in the S&P 500 and TripAdvisor Inc. climbed 20% as the Dow Jones Internet Composite Index rebounded after an almost 20% drop from a 13-year high. Tiffany & Co. soared 14% after profit beat analyst estimates.

Of the 492 companies in the U.S. benchmark equity gauge that have released earnings for last quarter, 74% have reported better-than-expected profit and 53% said revenue exceeded estimates in the period.

The S&P 500 is trading at 16.3 times estimated earnings. That’s below valuations from the market’s previous two peaks, when the ratio reached 16.7 in October 2007 and 26.3 in March 2000, according to data compiled by Bloomberg.

Global Equities

The Chicago Board Options Exchange Volatility Index (VIX), a gauge of volatility known as the VIX, slumped 15% for the month. The VIX has closed below 12 for five straight days, the longest streak since 2007.

The MSCI All-Country World Index finished the month about six points away from its all-time high reached in 2007.

Asian stocks rose for a third week, with the regional benchmark gauge capping its steepest monthly rally since September. The MSCI Asia Pacific Index posted a 3.2% gain for the month.

Equities in Europe have risen for seven consecutive weeks, the longest streak since August 2012, amid speculation the European Central Bank will introduce further stimulus. The Stoxx Europe 600 Index advanced 1.9% for the month, trading near the highest level since 2008. ECB President Mario Draghihas said policy makers are ready to ease monetary policy at their June 5 meeting if necessary.

Emerging Markets

The MSCI Emerging Markets Index surged 3.3% in the month for its biggest gain since October. Russia’s Micex (INDEXCF) Index rallied almost 10% in May for its biggest gain since 2011 and the ruble strengthened more than 2% versus the dollar amid easing concern about tensions with Ukraine.

President Vladimir Putin has refrained from escalating the crisis in Ukraine, following the country’s presidential election on May 25. Petro Poroshenko, who won the poll with more than 50% of the vote, has vowed to wipe out insurgents and re-establish order.

Treasuries are posting the biggest monthly gains since January as signs the world’s largest economy is failing to grow as anticipated leads investors to unwind bets for higher borrowing costs. The Bloomberg U.S. Treasury Bond Index (BUSY) rose 1.1% through May 29, pushing its gain for 2014 to 3.5%.

Global Bonds

The Bloomberg Global Developed Sovereign Bond Index advanced 0.4% in May and is up 4.3% this year. All 26 bond markets from Hungary to Japan tracked by Bloomberg and the European Federation of Financial Analysts Societies gained during the month.

In currencies, the Bloomberg Dollar Spot Index rose 0.3% in May after a three-month slump. The Mexican peso, South Korean won and Canadian dollar rallied at least 1% versus the greenback.

The S&P GSCI Index of 24 commodities slid 0.4%. Wheat dropped 13% in May for its biggest loss since 2011 as weather reports turned favorable. Coffee, cotton and corn lost at least 8%, while West Texas Intermediate crude oil and aluminum jumped more than 2%.

Gold futures dropped 3.9% for the month, the most since December, as the U.S. equity rally and signs of easing tensions in Ukraine curbed demand for the precious metal as a haven. The metal has climbed 3.6% in 2014.

 

Avoid these 8 retirement screwups

The potential pitfalls threatening a successful retirement are many, and the biggest errors fall into both psychological and financial categories, according to financial advisers. CNBC spoke with eight advisers, who between them came up with the eight most common mistakes made in retirement.

1. Lack of clarity

"The greatest concern we have with our clients is the psychological part," said Michael Randolph, senior adviser and certified financial planner with Willow Creek Wealth Management. "They'll say: 'What do I do? Paint the fences? Then what?'"

Advisers get many retired clients who are "lost" and not focused on their finances or their future, he added, because after having been very successful throughout their career, they now feel they no longer have a sense of control.

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"They feel cast adrift, [and] it's troubling, [so] it's very important to think it through before you retire so you know what to plan for," Randolph said. "If you don't have a great deal of clarity for what you want by retirement, then when will you have it?"

2. Refusal to accept change

Many people don't understand how to allocate resources over an unknown period of time, according to Kathleen Roth, a certified financial planner and partner with Waterstone Partners.

"The biggest thing is learning to accept that there might be a change in lifestyle and to live peacefully with that," she added. "But when you talk about budgets, people shut down."

As people feel they can no longer do what they want and regret perceived past carelessness, Roth said "it brings about a sense of denial and pain."

According to Roth, retirees need to learn new thinking skills, including:

• Getting in touch with personal values (i.e, realizing "it's us against the marketing machine").
• Making tough financial choices (i.e., eliminatin! g the expenses—designer clothes, latte coffees, takeout meals—that put them at financial risk).
• Being mindful of cash flow.

3. Having a DIY mentality

Another area of erroneous thinking is going it alone. "Many baby boomers have a do-it-yourself mentality; they're used to going online to do their own research," said Michael Salley, wealth manager and president and CEO of Salley Wealth Advisors Group. "They think this holds [true] for financial planning, as well."

Without professional assistance, retirees typically will underestimate and overlook their financial needs.

"People become too focused on returns instead of focusing on their personal financial goals," said Herb White, certified financial planner and president of Life Certain Wealth Strategies.

4. Failing to establish a formal plan

Retirees also often fail to establish a formal written retirement-income plan, according to White. The plan should include both a detailed budget and forward-looking tax mitigation strategies.

"They don't understand that formal plans give them a) the ability to use a very disciplined approach—not react emotionally to the market—and b) assurances that there's a way to address unexpected events," White said.

5. Playing it too safe

"Retirees saw CDs do well in the 1990s, and they expect them to do better in the future," said certified financial planner Edward Kohlhepp Sr., president of Kohlhepp Investment Advisors. "But we might be in a low-interest environment for the next five to 10 years."

Investors should have a lump sum of 20 to 22 times the amount they need to generate annually, he noted.

6. Not really downsizing

Relocating doesn't always equal savings. "A number of retired couples think they can move and downsize to save money," Kohlhepp said. "In actuality, many times they don't save much money in the move."

For example, if clients sell a $500,000 house, they might spend almost as much purchasing a smaller but nice! r new hom! e. "Between closing costs [buying and selling], moving and buying new furniture, they may spend about $100,000," Kohlhepp explained.

7. Not planning for parents

Salley at Salley Wealth Advisors Group said that although many baby boomers are financially supporting their elderly mothers and fathers, only a small percentage integrate their parents' financial needs into their own comprehensive financial plans.

"We need to provide for our parents, keeping in mind they may live till very old age," he said. "And we need to structure their assets to protect them. If we don't, we expose ourselves to run out of our own assets."

Many clients avoid making these kinds of decisions, because they simply don't want to face them, Salley explained.

8. Failing to maximize Social Security

White at Life Certain Wealth Strategies said many people are of the mind-set they should start claiming Social Security benefits at the earliest time possible. "They think if [they] collect for a longer number of years, it will be more beneficial, but it's not," he said.

White noted that for married couples, for example, there are more than 80 strategies for claiming Social Security, including "file and suspend" or "restricted applications."

These strategies are not publicized, and the "difference between the best decision and the worst possible decision of when to elect . . . can be well over $100,000," according to an article by the International Association of Registered Financial Consultants.

White warns against head-in-the-sand thinking. "People put blinders on and don't pay attention to areas that could potentially devastate their retirement," he said.

© CNBC is a USA TODAY content partner offering financial news and commentary. Its content is produced independently of USA TODAY.