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What Market Fluctuations Mean for Your Retirement Plan

What Market Fluctuations Mean for Your Retirement Plan

Ongoing market fluctuations have caused many of us to ask some of the same questions in 2022. Are we headed for a recession? Will inflation subside sooner than later? Should the Federal Reserve have moved earlier or has it done too much?

I hope that listening to today's episode will help folks understand why there are no simple answers to any of these questions. And, perhaps more importantly, I hope our listeners will come away with a better appreciation for how a comprehensive financial plan can help you answer the most important questions of all: How does what's happening in the markets affect my nest egg and my retirement? And ultimately, will I be ok?

1. Taking the bad ...

On Tuesday, September 27th, the Dow Jones Industrial Average and the S&P 500 both dropped to their lowest levels since November 2020. The markets rebounded a bit on Tuesday, but for many investors it's still a little jarring to see the Dow below 30,0000. And looking at a slightly broader picture of our economy, the Dow, the S&P 500, NASDAQ, and the international markets are all down over 20% for the year. And, largely due to interest rates rising, the broad bond markets, which many economists view as a safe haven during market volatility, are also down around 14% for 2022.

As has been the case for most of the year, the markets are reacting to a confluence of factors, including inflation, lingering supply chain disruptions caused by COVID, and the effects that Russia's invasion of Ukraine are having on some energy and food prices.

But perhaps the biggest reason that the markets have been so volatile this week is the Federal Reserve's aggressive moves against inflation. After raising interest rates for the fifth time this year on September 21st, the Fed also hinted it might raise rates again into early 2023. For those of us old enough to remember the 1970s and 1980s, this raised some parallels with how former Federal Reserve Chairman Paul Volker raised interest rates very high very quickly to fight off stagflation, which, in part, contributed to the start of a recession.

2. ... with the good. 

And yet, as has also been the case for most of 2022, there are also some very strong economic indicators that all the doom-and-gloom headlines often overshadow.

Unemployment is under 4%. Despite a slight uptick in August, inflation seems to be trending down. There are over 11 million job openings in the U.S., which means companies are still confident enough in the economy to keep hiring. The U.S. dollar is strong relative to other currencies. Corporate and bank balance sheets are in good shape, which was not the case during the Great Recession. And corporate earnings -- the biggest driver of stock prices -- are still forecasted to be up by just under 8% for the year.

3. It's all part of your plan. 

So, have we reached the bottom of this market correction? Is the economy going to slide into a recession? Are we in one already?

There are far too many variables affecting the economy and the markets right now to say for sure. I would caution our listeners to remember that, as we head into election season, the loudest voices on cable news and social media could be more interested in scoring political points than in analyzing the economy.

Rather than debate the definition of a recession or a bear market, it might be more helpful to recall what happened during the Great Recession: the markets bottomed in March of 2009 with the Dow Jones Industrial Average around 6,594.  Today, even after the tough year we have had in 2022, the Dow sits at over 29,000. Past results are no guarantee of future returns, but history tells us that short-term pain is a price that disciplined, committed investors pay to be able to enjoy their long-term gains.

What history, market trends, and cable TV can't tell us is what your financial goals are and how you're experiencing this most recent round of volatility.

The comprehensive financial plans that we design at Keen Wealth assume that there will be highs and lows – in the markets and in the course of your life. I believe that our personalized process can help folks weather these challenges, while focusing on growing their wealth, and progress towards a successful retirement. Don’t let scary headlines or temporary market dips recalibrate your goals without calling up Keen Wealth and discussing your plan.

About Bill

Bill Keen is a CHARTERED RETIREMENT PLANNING COUNSELOR℠ and independent financial advisor with more than 25 years of industry experience. As the founder and CEO of Keen Wealth Advisors, a registered investment advisory firm, he specializes in providing personalized retirement planning designed to help people thrive before and during their retirement years. With a passion for educating others, Bill regularly blogs about retirement planning, hosts the podcast Keen on Retirement, and has contributed to U.S. News and World Report, Reuters, Wall Street Journal’s Market Watch, Yahoo Finance, and other publications. Based in Overland Park, Kansas, Bill and his team work with clients throughout the greater Kansas City area and across the nation. To learn more, connect with him on LinkedIn or visit www.keenwealthadvisors.com.

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