MOLINE, Ill. — Wall Street closed 2022 as the worst year since 2008. The Dow Jones ended 2022 down around 8.8%, S&P 500 down 19.4% and NASDAQ down 33.1%.
"There have been periods in my career where I have been happy to turn the page to a new year and 2022, I am glad to see it's in the rearview mirror" said Drue Kampmann with True Financial Partners in Bettendorf, Iowa. "We saw a market decline into some bear market territory," Kampmann went on to say.
What is our current economic situation as we begin 2023?
We're still experiencing high inflation. So cost of goods and services are still high. We're seeing the Federal Reserve continue to raise rates, therefore things are more expensive specifically in borrowing money. The one nice thing we did see is we saw energy prices come down. So pain at the pump was reduced. But we'll see what happens into the new year here. So economically, I think the expectation is we're probably going to see some type of recession if we're not already in one because a lot of times the market is a leading indicator, meaning the stock market and behavior oftentimes lag. So I think we're going to we're going to see more recessionary aspects coming forward soon.
What can we expect for the rest of 2023?
Well, I think, well, hopefully, we've seen peak inflation number one, that means that hopefully, prices of goods and services are going to continue to fall. But I expect the Federal Reserve to continue to raise interest rates, at least for the first half of the year. So we may see a market really struggle through the first half of the year. But once we maybe see a Federal Reserve, either go pause and raising rates, or at least maybe even changing directions, which is possible towards the middle or end of the year, then we may see a market recovery towards the end of the year and see some economic factors continue to improve.
We are seeing people like billionaire Jeff Bezos coming out of the woodwork saying this is the year to hang on to your money. So when we look at the word recession, how bad will it get?
Well, a lot of it is going to hinder on what the Federal Reserve does, number one, and I also think it has a lot to do with the unemployment or the employment market. So there's some variables out there that are really going to determine which direction we go. But a couple of things that I've encouraged folks do is, you know, don't change or alter your current savings plan. But really, instead look at your current budget or your spending plan. And really separate out your needs and wants and make adjustments to your spending on the wants category. Because there are times like now where we may have to sacrifice price for the needs, because those are becoming more expensive, and cut some of those expensive wants. The second aspect of it would be is, don't overspend and don't add debt, specifically in the areas of like credit cards. Be careful to not add debt, especially when the cost of borrowing has increased so much because of higher interest rates. So those are two things I would encourage folks to do going into the new year.
We've been told for months not to make any changes to our investments but is now the time to be making those changes, especially after the last year seeing so many things on the stock market ending with double-digit losses on Wall Street?
I've had some calls and same thing, should we make changes? Should I not be investing in my 401k or my IRAs because the market has gone down? Actually, it's the opposite. Because if you look back to January of 2022, the market is significantly lower. So from a buyer standpoint, the market is much more attractive today than it was a year ago. So my encouragement is continue to invest because it's a greater opportunity because prices have fallen. It's kind of like shopping. When you go shopping, you're looking for sales while the markets 20% off right now, or even some parts of the market are 30 to 40% off. So It's a great buying opportunity if you have a long term perspective on things.
How do you get someone to flip their thinking when their losing tens of thousands of dollars in their retirement?
It's very hard. Don't get me wrong. There's times to pivot and look for opportunities, because I think the market is providing those opportunities. If you're closer to retirement, certainly you should be a little more conservative. But if you're still young, and you have many years ahead, 5, 10, 15, 20 years ahead, you should continue to look for those equity positions, in my opinion, because you still want to buy things cheaper. But it really depends on where you're at in your career, and how you're going to invest your money, but never stop looking for the opportunities no matter what.
You can learn more about Drue and the work at True Financial Partners by visiting their website by clicking here. Alternatively they can be reached by calling them at 877-359-8783.
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