Welcome to a new week here on the Retirement Quick Tips podcast! 

I’m your host Ashley Micciche, co-owner of True North Retirement Advisors, an independent financial advisory practice managing $340 million in client assets. I’m a Chartered Retirement Planning Counselor, and I started this podcast because I love helping people just like you gain clarity and make a plan for the retirement you envision. 

The theme this week on the podcast is: Nowhere To Hide

In the presidential election season of 1992, campaign advisor to Bill Clinton, James Carville, famously advised the future president and his campaign staff to focus on the economy every chance they got. At that time, the US was in a recession, and highlighting that fact and connecting the dots back to then-president George HW Bush, became a winning strategy. 

Carville’s catchphrase -  it’s the economy, stupid! - became famous and exactly 30 years later, we find ourselves in another recession - this time driven by massive government spending related to Covid ($4.5 trillion worth so far), which has stocked eye-popping inflation, and the need for the Fed to step in to aggressively raise interest rates. 

Inflation is bad for your wallet, but higher interest rates to tame inflation make the problem worse, at least in the short-term. Higher interest rates are already making anything requiring borrowing more expensive, so if you’re in the market for a car or a house, it just got a lot more expensive - car loans are now over 5%, and mortgage rates are over 6%. If you have credit card debt, rates are sky high - above 20% for many borrowers. 

And of course, there’s the impact on the stock market from all this as well. As I record this podcast, the stock market is down 22% this year. If you’re concentrated in tech stocks like too many investors are, you’re doing even worse than that, with the tech-heavy NASDAQ down over 30% now for the year. 

And the problem is likely to worsen. In August, Federal Reserve Chairman Jerome Powelll, acknowledged the unavoidable reality of raising interest rates to combat inflation, saying: “While higher interest rates, slower growth and softer labor market conditions will bring down inflation, they will also bring some pain to households and businesses,” he said. “These are the unfortunate costs of reducing inflation. But a failure to restore price stability would mean far greater pain.”

What he means is that the consequences of a recession are coming. Raising interest rates is done to slow the economy and tame inflation. There’s a price tag for doing that, and a further slowing economy means that job losses are on the horizon. The job market is still strong and unemployment is near historically low levels, but jobs are a lagging indicator, meaning that the jobs situation gets worse after the economy sours. 

A few weeks ago, I talked about some important ways you can protect your finances in this gloomy economic climate. Things like aggressively reducing your debt, avoiding any unnecessary purchases to preserve cash, and delaying retirement are all important ways you can protect yourself in 2022.  

So this week, I’ll focus specifically on what you can do as an investor when it seems like there’s nowhere to hide in this deteriorating economic and investment climate. 

That’s it for today. Thanks for listening! Come on back tomorrow when I’ll talk about how now is the ideal time to trim some fat in your investment portfolio. 

My name is Ashley Micciche...and this is the Retirement Quick Tips podcast.

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Tags: retirement, investing, money, finance, financial planning, retirement planning, saving money, personal financ