The Confluence Of Bad News For Recent Retirees And Those About To Retire

Published Friday, May 12, 2023 at: 11:06 PM EDT

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The bear market, which started June 23, 2022, and bad timing, loom large for many investors in their 60s.

Labor Department data show the labor participation rate dropped during the pandemic. Many more individuals than expected in their 60s retired earlier than planned after the pandemic struck in March 2020. Then, came Russia’s invasion of Ukraine, an inflation crisis, and China’s threat to the U.S. led world order. The confluence of bad conditions has heightened fears for recent retirees and those planning to retire soon.

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Consumer sentiment tumbled 9% amid renewed concerns about the trajectory of the economy, erasing over half of the gains achieved after the all-time historic low from last June, according to the University of Michigan’s (UM) consumer expectations index. “While current incoming macroeconomic data show no sign of recession, consumers’ worries about the economy escalated in May alongside the proliferation of negative news about the economy, including the debt crisis standoff.“ Expectations for the economy for the next 12 months plummeted 23% from last month, UM said in its monthly release, and long-run expectations slid by 16%, indicating consumers are worried that any economic downturn will not be brief.

Economists at The Conference Board (TCB), an association for large companies, said Wednesday they expect a recession will begin in the next six weeks. However, TCB expects the recession to be shallow and end by early 2024. Still, a possible default on the U.S. debt and Federal Reserve rate in June — the eleventh since March 2022 — add to fears a recession could be longer and much worse than expected.

However, even as conditions are making it hard to manage financial and psychological fears for investors at retirement age, it is important to remember that debt limit negotiations between the House of Representatives and the Biden Administration are not necessarily going to fail, inflation figures released Friday morning showed modest progress, and the labor market has remained so strong that no recession may materialize.

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The Standard & Poor’s 500 stock index closed Friday at 4124.08, down -0.16% from Thursday, and down -0.29% from a week ago. The index is up +84.32 from its March 23, 2020, Covid-19 bear-market low and -14.02 from its January 3, 2022, all-time high. While recent retirees and those planning to retire soon may be concerned, the long list of threats and investor risks are not so different from previous bear market periods when a confluence of crises tested an investor’s ability to tolerate risk, like the global financial crisis of 2008.

The Standard & Poor's 500 (S&P 500) is an unmanaged group of securities considered to be representative of the stock market in general. It is a market-value weighted index with each stock's weight proportionate to its market value. Index returns do not include fees or expenses. Investing involves risk, including the loss of principal, and past performance is no guarantee of future results. The investment return and principal value of an investment will fluctuate so that an investor's shares, when redeemed, may be worth more or less than their original cost. Current performance may be lower or higher than the performance quoted.

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This material represents an assessment of the market and economic environment at a specific point in time and is not intended to be a forecast of future events or a guarantee of future results. Forward-looking statements are subject to certain risks and uncertainties. Actual results, performance, or achievements may differ materially from those expressed or implied. Information is based on data gathered from what we believe are reliable sources. It is not guaranteed as to accuracy, does not purport to be complete, and is not intended to be used as a primary basis for investment decisions.​​​​​​

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93% of CEO expect a recession in the next 18 months​​

But they say it will be shallow and short. Compared to the global financial crisis​​

As interest rates remain elevated, consumer spending will weaken​​

In Qtr 2 current qtr, we will go negative and enter a recession​

Inflation will be 3% and not until 2% fed target in 24​​

One more rate hike in June meeting​​

A recession in mid 2023 and lasts until early 24​

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The big picture significance of this chart is that the LEI has historically rolled over very definitively prior to recession – except for the Covid-19 recession.

 

Nothing contained herein is to be considered a solicitation, research material, an investment recommendation, or advice of any kind, and it is subject to change without notice. Any investments or strategies referenced herein do not take into account the investment objectives, financial situation or particular needs of any specific person. Product suitability must be independently determined for each individual investor. Tax advice always depends on your particular personal situation and preferences. You should consult the appropriate financial professional regarding your specific circumstances. The material represents an assessment of financial, economic and tax law at a specific point in time and is not intended to be a forecast of future events or a guarantee of future results. Forward-looking statements are subject to certain risks and uncertainties. Actual results, performance, or achievements may differ materially from those expressed or implied. Information is based on data gathered from what we believe are reliable sources. It is not guaranteed as to accuracy, does not purport to be complete, and is not intended to be used as a primary basis for investment decisions. This article was written by a professional financial journalist for Advisor Products and is not intended as legal or investment advice.

This article was written by a veteran financial journalist based on data compiled and analyzed by independent economist, Fritz Meyer. While these are sources we believe to be reliable, the information is not intended to be used as financial advice without consulting a professional about your personal situation.

Indices are unmanaged and not available for direct investment. Investments with higher return potential carry greater risk for loss. Past performance is not an indicator of your future results.

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