Will a Recession Happen This Year Ep 86

The markets have been wild so far this year. On Monday, the market was trading down most of the day and at some points it was down a thousand points. But then at the end of trading the market bounced back. Expect more volatility.

In 2021, the economy experienced record growth. According to the LA Times, the stock market saw 68 record highs. But the burner may have turned on a little too hot and now our proverbial dinner is getting burned by inflation. When our money buys less product, everybody feels it.

When overheating happens, it indicates that the economy is growing too quickly and it normally can’t continue. The Federal Reserve is tasked with a huge decision: 

Increase interest rates to tame inflation or keep them as they are. If the Fed doesn’t increase rates, it may prolong the inflationary problem. If they do increase rates, it may create a recession. The Fed is expected to give indication today if they will raise rates in March.

If the Fed decides to hold rates where they are at near zero, the markets will probably bounce even higher and ballooning prices will stay. I read a great analogy that Tarek Mansour gave on Twitter to describe this situation.

It’s always a good idea to assess your allocations to determine how much risk you are taking on. Your risk changes as markets change if you are in equities, you may need to rebalance. 

 Determine how long you expect to go before you’ll need access to your money. If it’s more than 10 years, you may not need to do anything. However, if you’re within 10 years of needing your money, I suggest removing some risk.

The traditional way to remove risk has been by buying bonds or holding cash. Neither of those is generally a winning proposition in today’s climate. Remember, when interest rates go up, bond values will go down.

At the end of the day most people will come to find that their income in retirement determined their outcome.

Most people save for years and work hard to hopefully eventually be able to retire and enjoy life. It doesn’t really matter what amount you were earning for 30 years, if at the end your money is reduced and you can’t afford your retirement. This is what the fixed indexed annuity guards against and that’s why we believe it’s an essential element to a well thought out financial plan. Call us at 864 641.7955.

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