Ouch. The markets finished down for the week, the month, and the quarter. Inflation continues to rise, which means the Fed is expected to continue interest rate increases. The dollar has gained against most major currencies, including the Euro and Pound. Which is great if you want to travel, and not so great if you want to import goods.
The thought of continued Fed action has led to worries of a significant recession. Jerome Powell, Chair of the Federal Reserve Board of Governors, has said they will continue to raise interest rates to bring inflation back down to their guideline of 2%. Raising rates is a way of tightening, or decreasing, the monetary supply, in an effort to slow down the economy.
And watching the market right now is scary; but, as sick to your stomach as your 401(k) or TSP balance is making you, this is a phenomenal thing for people who are still working. Focus on the number of shares you have, and not the dollar value. If you have 10 houses that you paid $100,000 each for in 2020, and in 2021 they were worth $125,000 each, you went from $1,000,000 (10 times $100,000) to $1,250,000 (10 times $125,000). This year, the market has dropped, and each house is worth $105,000. Ouch – you’re down from $1,250,000 to $1,050,000. You still have ten houses. And the ten houses are worth more than in 2020.
That’s the market right now. The S&P 500 is still higher than it was two years ago. And if you are investing, you’re buying more shares with each dollar invested than you were last year. Everything is on sale. Use this time to make tax-efficient moves: rebalancing taxable accounts, reducing concentrated stock positions, and Roth conversions. This is the time to buy low.
If you are in retirement, check in with your advisor. If you have developed a financial plan, they should be able to tell you if you’re still on a successful trajectory. If you don’t have a plan, your advisor should be able to help you figure out if your spending is sustainable. Investing for retirement spending, or distributions, is very different than investing for accumulation.
Your action item this week is to schedule your fall HVAC maintenance and change all your filters. Keeping your system maintained helps with heating bills and the life of your system.
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Investment advice offered through Great Valley Advisor Group, a Registered Investment Advisor.
All performance referenced is historical and is no guarantee of future results. All indices are unmanaged and may not be invested into directly.
The opinions voiced in this show are for general information only and are not intended to provide specific advice or recommendations for any individual. To determine which strategies or investment(s) may be appropriate for you, contact the appropriate qualified professional prior to making a decision.