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“Most kitchens have the same spices in the spice rack. That does not mean everyone is a good cook.”
The bear market, which started June 23, 2022, and bad timing, loom large for many investors in their 60s.
Labor Department data show the labor participation rate dropped during the pandemic. Many more individuals than expected in their 60s retired earlier than planned after the pandemic struck in March 2020. Then, came Russia’s invasion of Ukraine, an inflation crisis, and China’s threat to the U.S. led world order. The confluence of bad conditions has heightened fears for recent retirees and those planning to retire soon.
Consumer sentiment tumbled 9% amid renewed concerns about the trajectory of the economy, erasing over half of the gains achieved after the all-time historic low from last June, according to the University of Michigan’s (UM) consumer expectations index. “While current incoming macroeconomic data show no sign of recession, consumers’ worries about the economy escalated in May alongside the proliferation of negative news about the economy, including the debt crisis standoff.“ Expectations for the economy for the next 12 months plummeted 23% from last month, UM said in its monthly release, and long-run expectations slid by 16%, indicating consumers are worried that any economic downturn will not be brief.
Economists at The Conference Board (TCB), an association for large companies, said Wednesday they expect a recession will begin in the next six weeks. However, TCB expects the recession to be shallow and end by early 2024. Still, a possible default on the U.S. debt and Federal Reserve rate in June — the eleventh since March 2022 — add to fears a recession could be longer and much worse than expected.
However, even as conditions are making it hard to manage financial and psychological fears for investors at retirement age, it is important to remember that debt limit negotiations between the House of Representatives and the Biden Administration are not necessarily going to fail, inflation figures released Friday morning showed modest progress, and the labor market has remained so strong that no recession may materialize.
The Standard & Poor’s 500 stock index closed Friday at 4124.08, down -0.16% from Thursday, and down -0.29% from a week ago. The index is up +84.32 from its March 23, 2020, Covid-19 bear-market low and -14.02 from its January 3, 2022, all-time high. While recent retirees and those planning to retire soon may be concerned, the long list of threats and investor risks are not so different from previous bear market periods when a confluence of crises tested an investor’s ability to tolerate risk, like the global financial crisis of 2008.
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93% of CEO expect a recession in the next 18 months
But they say it will be shallow and short. Compared to the global financial crisis
As interest rates remain elevated, consumer spending will weaken
In Qtr 2 current qtr, we will go negative and enter a recession
Inflation will be 3% and not until 2% fed target in 24
One more rate hike in June meeting
A recession in mid 2023 and lasts until early 24
The big picture significance of this chart is that the LEI has historically rolled over very definitively prior to recession – except for the Covid-19 recession.