Wealth managers call for calm in ‘terrible market’ – InsuranceNewsNet

Most Americans with investment plans for retirement or other investment portfolios will not look forward to the first half of 2022.

Over the past six months, financial markets have been rocked by economic turmoil and uncertainty caused in large part by soaring inflation and rising interest rates. Underlining the upheaval, the flagship S&P 500 index ended the first half of the year with a loss of more than 20% after starting the year at a record high – marking its worst start to the year since 1970.

Amid the turmoil, a number of Connecticut wealth managers said they advise their clients not to panic and to stay focused on their long-term goals.

Widespread losses

Market volatility reflects investor anxiety and uncertainty amid sharply rising interest rates as Federal Reserve and other central banks have been grappling with the highest inflation in over 40 years.

The Fed has raised interest rates three times this year, with last month’s three-quarters of a percentage point increase the biggest since 1994 . Higher rates can reduce inflation, but they also slow the economy – and increase the risk of a recession.

On June 13, the S&P 500 fell into a bear market. Last week it was 21% below its January 3 historic record and had regained its level of the beginning March 2021.

Bonds, an ostensibly reliable part of investment portfolios, also faltered, reflecting investors’ worries about inflation eroding the purchasing power of fixed bond payments. Investment-grade bonds are down around 11% in the first six months of 2022. Such a drop is even more visible due to its scarcity. The Bloomberg WE The aggregate index, a widely used benchmark, has recorded just four years of losses since 1976.

Cryptocurrencies have also failed to provide a safe haven from the market turmoil. Bitcoin plunged close $69,000 last november at below $20,000 last month, in part because of the same factors that sent stocks tumbling: inflation and rising interest rates.

If a recession hits, Moss doesn’t expect it to be severe. He also thinks the current disruption could lessen the impact of such a slowdown.

“You’ve seen the markets take their losses before in anticipation of a recession,” Moss said.

Focus on the long term

Many experts say investors should prepare for more headwinds, but not act recklessly.

“It seems like a ‘stagflation’ type environment to me,” Ray Daliofounder of Westport-based Bridgewater Associatesthe world’s largest hedge fund, said in a recent interview with CNN Richard Quest . “Individuals need to know what this means. For example, the interest rates and debt securities they hold will not have an adequate real return. In other words, not enough income to offset the inflation.”

Dalio added that “if people start thinking in terms of purchasing power and realize that cash instruments and debt securities are going to be a challenge and try to diversify their portfolios, these would be the main securities that I would pass on.”

Wealth managers are also urging clients to remain confident in long-term strategies.

“If we look at the behavior of the market in the past when we’ve had these types of corrections and pullbacks, history has shown us time and time again that an investor who sticks to his plan will ultimately benefit from his stake when the market recovers,” says the wild goose. “Emotion is the enemy of long-term returns.”

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“You need to be balanced, diversified, and allocate with a lens toward the potential downside, not just upside,” Moss said. “To quote by Wayne Gretzky famous quote: ‘Skate where the puck is going, not where it is.'”

This article contains reports from The Associated Press.

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Dolores W. Simon