Markets have already seen their fair share of turbulence this year, and as financial advisors, we have been addressing plenty of questions regarding predictions, concerns, and opportunities for investors. Here are three major takeaways that summarize our current outlook on investing for 401(k) participants and anyone who is interested in staying current on market news.
- The market is down year-to-date, but it isn’t all doom and gloom.
Due to concerns over inflation, rising interest rates, and the Russia-Ukraine War, the stock market has been in negative territory since early January. However, the S&P 500 is only down -4.8% year-to-date, recovering more than 7% from its lowest point in early March, where it was down -12.3%. Additionally, one month after the invasion of Ukraine began on February 24th, the S&P 500 has been up +5.5%. While the market has been volatile, and will likely continue to see ups and downs, current signs are pointing to rising optimism. We encourage all investors to stay disciplined and not panic due to headlines or market losses.
- Inflation is very real but is showing signs of stabilization.
Rising inflation has been a hot-button item since last year and is affecting wallets at the gas pumps and grocery stores around the nation. However, we are seeing signs of stabilization in some key goods, with lumber prices falling 33% and oil prices dropping 15% since their peaks in early March. Used vehicle prices, an important indicator of inflation, are down 6% since the beginning of the year, according to Manheim’s Used Vehicle Price Index. While this stabilization doesn’t guarantee that inflation will disappear, it shows a relieving trend in the right direction. Additionally, the Federal Reserve raised interest rates in March by 0.25% and are expected to continue raising rates through the end of the year. While these rate hikes make loans and interest payments more expensive for everyone, they also serve to cool down the economy and lower inflation.
- Trust your own financial plan, not the headlines.
Now more than ever, it is critical that every family has a financial game plan. Creating a simple budget, starting an emergency fund, and contributing to your 401(k) account are the best ways to start thinking proactively instead of reactively. Headlines are designed to make you think the absolute worst or best of a situation, so it is important to avoid reactionary behavior by developing a process and understanding your own finances. For those invested in Target Date Funds through the 401(k), you can trust in the process that automatically adjusts your risk level as you approach retirement. These funds are built to withstand market volatility like we are experiencing now. For those of you who are younger, or less prepared for retirement, take this opportunity to contribute more to your 401(k) account. These are funds you won’t access until retirement age, so early contributions are key to growth over time.
If you ever want to talk about your account or your investments, call or text me (Luke Burton) at (770-268-1805). You can also email me at 401k@cwmatthews.com.
You can also listen to Narwhal Capital’s daily stock market podcast, “The Investing Podcast” on Apple Podcasts or Spotify, where we cover daily news for all investors.
All market data is as of 03/25/2022.
