We’ve seen the stock market rise to record highs recently, but how long can this last? 54% of American investors see the stock market heading for a crash, according to a recent Allianz survey.[1] There are a few reasons why we could see a market correction soon, including the Delta variant and higher inflation. Are you prepared for a market correction?
Reason #1 The Delta Variant
There was a return to normalcy as COVID infection numbers fell, but then the spread of the Delta variant began. We could see the economy take a pause on its way to fully recovering. We still saw labor shortages, disrupted supply chains, and a drop in consumer confidence in September.[2]
Reason #2 Higher Inflation
Inflation has been higher than usual recently, and over two-thirds of survey respondents expect prices to move higher in the next year. [3] Inflation can hurt purchasing power, which can weigh down economic growth. The last time the inflation rate was over 5%, the U.S. was in the Great Recession.[4] Consider the long-term impact of inflation on your savings – how much could your purchasing power decrease over the next 20 years? For example, after 20 years with a 2% inflation rate, $1,000,000 would only have the buying power of $672,971.[5]
Why Might You Need to be Concerned?
A market correction could pose a particular threat to you as you near and enter retirement. Two retirees with identical wealth and long-term market averages in retirement can have very different financial outcomes depending on the state of the economy when they begin retirement. Someone retiring during a bear market might see their portfolio recover as the market does, but they may also see a reduction in the overall return of their portfolio because of how much they had to withdraw early on when prices were down. Have a plan for how you would handle a retirement curveball like a major market correction.
Work with us to create an investment strategy designed to fit your risk tolerance and retirement lifestyle goals. Retirement shouldn’t be a time of anxiety or worry; it should be a time when you feel financially secure and can enjoy the money you’ve worked hard to earn for decades. [sc name=”comp_review”] to sign up for a time to talk to us at [sc name=”company_name”], about how we can help.
[2] https://www.bloomberg.com/news/articles/2021-09-28/u-s-consumer-confidence-unexpectedly-falls-to-seven-month-low
[3] https://markets.businessinsider.com/news/stocks/stock-market-outlook-american-investors-stocks-crash-allianz-covid-inflation-2021-10
[4] https://www.fool.com/investing/2021/08/28/stock-market-crash-likely-5-data-points-of-concern/
[5] https://www.buyupside.com/calculators/inflationjan08.htm
The commentary on this blog reflects the personal opinions, viewpoints and analyses of BML Wealth Management’s employees providing such comments, and should not be regarded as a description of advisory services provided by Cooper Financial Group. The views reflected in the commentary are subject to change at any time without notice. Nothing on this blog constitutes investment advice. Investing involves risk, including the potential loss of principal. No investment strategy can guarantee a profit or protect against loss in periods of declining values. Past performance is no guarantee of future returns.
Investment Advisory services offered through Cooper Financial Group, an SEC Registered Investment Advisory firm. Cooper McManus is not affiliated with West Wealth Group, LLC. Investment advisory services may also be offered through West Wealth Group, LLC, an SEC Registered Investment Adviser. Insurance Services are offered through BML Wealth & Insurance Services, California Insurance License #0M15550. We do not provide tax or legal advice, all individuals are encouraged to seek guidance from qualified professionals regarding their personal situation.
