2016 Investment Outlook Seminar Quiz
Click here for the answers – AFTER you take the quiz.
View our video of the seminar by clicking here.
1) Which of the following has NOT happened so far in 2016?
- The Federal Reserve announced another rate increase.
- The stock market had its worst start to a year.
- Stocks set record highs.
- The yield on the 10-year Treasury note set a record low.
2) Name the two fundamental determinants of whether stock prices go up or down over the long run.
3) Interest rates act as a discount mechanism for determining the current value of stocks, so continued low interest rates suggest …
- … it’s time to load up on bonds.
- … recent price-earnings ratios compare more favorably to historic averages.
- … stocks are pricier than they seem.
- … the Federal Reserve’s monetary policy is succeeding.
4) Since the Federal Reserve raised short-term interest rates in December 2015, financial media have anxiously anticipated the next increase. Bob says he’s not as concerned about when as he is about …
- …why it’s taking so long.
- …whether the Fed’s decision is unanimous.
- …how high and how rapidly the Fed plans to push rates.
- …Fed Chair Janet Yellen’s comments afterward.
5) Between June of last year and June of 2016, U.S. consumers saved an estimated $3.6 billion from lower gas prices. What did they do with $2.5 billion of it?
- invested in bank CDs
- bought foreign-made trucks
- added to their savings accounts
- spent it in bars and restaurants
6) As measured by gross domestic product, the U.S. economy has never been bigger. Which of the following has NOT been a strong contributor to economic expansion?
- Business investments
- Consumer spending
- Employment
- Housing
7) Which of these does Bob see as a possible drawback for further U.S. economic growth?
- Employment and wage growth
- Retail sales
- Likely dissipating drag of strong dollar and lower oil prices
- Rates of productivity and labor force participation
8) Eight of the last 10 recessions followed Fed rate tightening to control runaway inflation. Why doesn’t that worry Bob at the moment?
- The Fed has other distractions, such as China.
- The Fed doesn’t have as much control as it used to.
- Inflation has been staying below the Fed’s target rate of 2%.
- Since the last recession, inflation has settled into a normal range.
9) For decades, the Efficient Frontier suggested investors could optimize the tradeoff between risk and return with a portfolio of about 50% stocks and 50% bonds. Why is Bob saying that a stock/bond split closer to 60/40 is more appropriate?
- Low interest rates have required a higher stock exposure.
- Greater globalization has made stocks riskier.
- More advanced theories have discredited the Efficient Frontier.
- The 60/40 split accounts for tax changes.
10) Which of the following is NOT a reason for a 4% annual withdrawal strategy from a portfolio that’s 60% stocks and 40% bonds?
- That withdrawal rate should allow 10 years (40 divided by 4) of distributions from investments that are relatively safe from stock sell-offs.
- That withdrawal rate should allow you to double your principal investment amount in 18 years.
- Based on historical returns for stocks and bonds, the 60/40 portfolio could afford the annual withdrawal without depleting the principal.
- Based on the average length of a stock market recovery, you shouldn’t have to sell stocks in a downturn.
Click here for the answers – AFTER you take the quiz.
Photo by Reuben Neese
(initially posted September 29, 2016)
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