Financial Planner LA’s David Rae appears on In Depth with Bob DeCastro, which airs on Fox 11 LA and KCOP 13 Los Angeles. Topics include inflation, the stock market, investing now, financial tips, and other personal finance news of the week. Check out this personal finance video and keep reading for further insights into dealing with inflation and where to invest now.
#1: THE CURREN
T INFLATION OUTLOOK AND THE LIKELIHOOD OF A RECESSION
The Fed will try and slow the economy to bring inflation in line by raising interest rates. But many consumers are still flush with cash and sitting on record home equity amounts. All that money people saved during quarantine is now being spent. While spending may slow, there still seems to be a ton of pent-up demand to get out and enjoy life, which often includes spending money.
As the White House has pointed out, there doesn’t have to be a recession. If unemployment stays low, a possible recession would likely be mild, if we even have one at all. Since we are talking about personal finances here, many people are in good shape to weather this type of recession; many Americans may not even feel the recession.
#2: THE BEAR
MARKET: WHAT DOES IT MEAN FOR INVESTORS?
We are likely closer to the bottom of the bear market than we are to the former peak of the US stock indexes. If you choose to bail out of your investments, this will likely be a costly mistake that will damage your financial security. Think of a bear market as a big sale on stocks; who doesn’t like a good 20% discount on something you wanted to buy anyway?
If you need a little more coaxing to stay invested, consider this. If you purchased stocks on the first day of the average bear market since World War II you would have been rewarded with outsized stock market returns for the next 12 months, averaging more than 22% each time the American Stock market recovered from a bear market.
#3: WHAT DOES THE FUT
? HOW LONG WILL WE BE ENDURING THIS UNCERTAIN ECON
Every time America has had a bear market or recession, the stock market has returned to new record highs. Missing out on these big returns are wealth killers. Don’t miss out. While past performance does not indicate future results, there is no reason to think this time will be different.
Killing inflation (or at least bringing it closer to the target of 2% per year) will likely take some time. We will probably be living with uncertainty for at least another year. If you are still employed, use the bear market as motivation to get serious about your finances.
Some shocking statistics:
-1/3 of people aren’t saving anything for retirement
-1/3 of people making $250,000 are living paycheck to paycheck.
You can’t earn your way out of bad financial habits. As a Certified Financial Planner™, I don’t care where you spend your money or how much you spend as long as you are on track for your various financial goals.
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