People in the financial services industry and on Wall Street would say that I am overreacting by suggesting there should be a present concern when it comes to 401K plans. Sure, the last few months have not been good for the stock market, and October doesn’t appear to be starting out any better.
They would say, “Don’t look at it and ignore your statements. This is normal. Don’t worry and go on with your life” – (my favorite) “You are a long-term investor.”
Say what you will about the losses in the stock market. I would point to two reasons you might want to double-check and ensure you are comfortable with the risk in your investments.
The Losses are tied to Rising Interest Rates
We all knew this was going to be a problem at some point. Interest rates represent the cost of debt, and we have debt of all kinds at record levels. This has the potential to hit the economy with some devastating blows. Remember, they are still fighting inflation. I have always said that they will kill whatever gets in the way. Regardless of casualties, they have to get a grip on inflation. Could the stock market and the economy become road-kill?
This Doesn’t look like a Bull Market
When a bear market is over, a rip-roaring bull market starts. The market goes way up as it starts the period of recovery. Last year’s bear market was very underwhelming as far as bear markets go. However, the most underwhelming event was last October when the bear market turned into the bull market. If that was the start of a long-term bull market, it gets the award for most underwhelming. The starts of bull markets are spectacular. This started with a limp.
Conventional wisdom says don’t worry about it. Just remember, there is nothing conventional about this stock market.
Bob Brooks is the host of the Prudent Money Radio Show. He is also a Financial Advisor. If you need help assessing your investments, take us up on the no-cost 30-minute phone call where Bob can give you an opinion. Book your appointment online by clicking here or write us at info@prudentmoney.com
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