The year 2022 has been rough for investors. Valuations have gone down in both the stock and bond markets, leading many to report losses. Fortunately, there are steps investors can take to safeguard their retirement investments from additional adverse outcomes.
After a prolonged bull market, the stock market cooled off in 2022. The benchmark S&P 500 index reached a peak of 4,796 points on Jan. 3, 2022, but has since been trending downward. The downward movement is attributable to many factors, including geopolitical tensions and a reversal of the Federal Reserve’s accommodating interest rate policy. As these factors play out, their effects impact more markets, including housing, causing many analysts to conclude that a recession is in the offing. One of these is Mike Singleton, senior analyst at Invictus.
In an interview with Fox Business near the end of 2022, Singleton affirmed that the US housing market was one of the best leading indicators that they had and that the numbers coming out of the sector were worrying. In particular, he pointed out that mortgage applications in 2022 were down to lows previously seen before the 2008 financial crisis. Further, home sales were down 42 percent from their highs in 2020. According to Singleton, the weakness in the housing market would filter into the broader economy in six to 12 months, leading to a recession.
Many financial institutions have a similar view of the near-term future. In fact, in their market performance estimates for the next five to 10 years, JPMorgan, Fidelity, and Vanguard all published bleak outlooks. Financial advisors also foresee significant economic headwinds coming, and project that the situation may trickle down to other regions of the world, leading to a global recession that may last several years.
Protracted global recessions pose unique challenges to investors, one of which is poor market returns. For example, the period between 2000 and 2012 is often called “The Lost Decade,” since anyone who bought the S&P 500 at the peak of the 2000 Dotcom Bubble had to wait until 2012 to earn a return on that investment. If something similar happens and stock and bond markets stay down for years after 2022, individuals saving for retirement will worry about whether their portfolios can generate enough returns for them to live comfortably in their golden years.
Financial stability during retirement is already a major concern for Americans. In fact, close to half of Americans worry that they will run out of money in retirement. In this market, therefore, it is no wonder many people are increasingly concerned about the returns on their retirement portfolios. Fortunately, there are investment options that give returns even in down markets.
Markets are prone to cycles, meaning there are both good and bad periods. What’s important is for people to prepare and position themselves adequately for either of the two. At this time, for example, investors should speak with competent financial advisors on how to modify their investment portfolios to protect their capital and earn returns during the recession.
There are several ways people saving for retirement can protect their invested principal while earning returns, even in a tough economic environment. One of these is with fixed annuities. In essence, fixed annuities are investment vehicles offered by insurance companies. Investors purchase the annuities through lump sum or monthly payments and afterward, the insurance company invests the money and generates a return for the investors. Investors can make annual withdrawals from their annuities later on.
For more information about annuities and similar principal-protected investments, investors should speak with a knowledgeable financial advisor.
This message is not meant to be a recommendation or solicitation. Before investing consult with your financial advisor, CPA, and attorney. "Investment advisory services are offered through Fusion Capital Management, an SEC- registered investment advisor. The firm only transacts business in states where it is properly registered or is excluded or exempted from registration requirements. SEC registration is not an endorsement of the firm by the commission and does not mean that the advisor has attained a specific level of skill or ability. All investment strategies have the potential for profit or loss.
