October 2022 | Question of the Month

By Admin Prepare

October 25, 2022

“Hello.  Unfortunately, our retirement savings has taken a very big hit this year.  Most of our money is with large custodians through our 401ks and IRAs, and this money is managed in a very passive way within target date funds.  We didn’t realize that a target date fund could take this big of a hit.  How much lower will the equity markets go before the Fed rethinks it aggressive rate hike mission?  When will the Fed pivot and start to ease?  What, if anything, should we do now?  Can you please provide us your thoughts on the markets and the economy?  Thank you.”  Roger and Gloria

Thank you for sending in your question.  It is a great one that is on the minds of many people right now who are in a similar situation and wondering the same thing.

As you are all aware, 2022 has been a very volatile and tough year for the main market indexes.  Many market risk indicators turned negative back in early January of this year, and that caused adaptive portfolio money managers to move to cash or very defensive at that time. 

That was the right thing to do to help protect people’s accounts during this high risk and volatile bear market time period. 

However, most people do not utilize adaptive management strategies and thus have taken some large losses to their accounts this year, and of course this is unfortunate.  So, let us answer your questions about what is happening in the markets currently first, then address your question of what we suggest doing going forward. 

So, how much lower will the equity markets go before the Fed rethinks its aggressive rate hike mission and start to take a pause, andwhen will the Fed pivot and start to ease?  The answers to these two questions remain to be seen and even though the Federal Reserve promises to be “data-dependent”, it is also choosing which specific data they want to focus on in making decisions on the economy.   

As of today, the war between Russia and Ukraine is not over, U.S. mortgage rates hit 7%+, inflation remains at high levels, China is still slowing down with its Zero-COVID policy and the U.K. almost had a financial crisis.  Will we have another financial crisis before the Fed reverses and steps in to “save the day” once again?  We are not sure about 2022-2023 having a “Lehman Moment”, but it is likely that something is going to break before the Fed stops the rate-hikes. 

There are many other factors that are in play currently which will have effects on the markets and the economy going forward.  To learn of all of these factors and the details of them, we highly suggest attending a Prepare Retirement Course in your area. 

These courses also will cover the outlook for the near future and address the tools and strategies available to help protect people’s retirement accounts and make them as tax efficient as possible.  The course also covers planning opportunities that are available currently that can help many people take advantage of the current economic and market situation. 

To get your retirement planning questions answered or to sign up for a retirement course, visit the Prepare Institute website (www.theprepareinstitute.org) to contact us and/or find a retirement course or class near you. 

Content is for educational and informational purposes only.  It is not intended to be used as the sole basis for financial decisions, nor should it be construed as advice designed to meet the particular needs of an individual’s situation. You should contact your retirement and tax professional before utilizing any of the information in this article.