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It’s been a nerve-wracking yr for buyers.
With ongoing inventory market volatility, high inflation and curiosity rate hikes, many marvel if we’re heading for a chronic financial downturn.
“I believe we now have to be defensive,” mentioned licensed monetary planner Ivory Johnson, founding father of Delancey Wealth Management in Washington, D.C.
While it is inconceivable to foretell precisely what’s going to occur, monetary advisors are making ready shoppers for no matter could also be on the horizon.
We spoke with consultants from CNBC’s Financial Advisor Council to see what they’re predicting for the fourth quarter of 2022. Here’s what they are telling shoppers.
Delivering his annual coverage speech in Jackson Hole, Wyoming, Federal Reserve Chairman Jerome Powell in August warned the central financial institution’s plans to proceed elevating rates of interest to combat hovering costs may cause “some pain” to the U.S. economy.
And on Sept. 21, Powell mentioned his “main message hasn’t changed” for the reason that August symposium, vowing to convey inflation right down to 2%.
However, the Fed’s aim could also be tough to attain, particularly within the close to time period, in line with Lee Baker, a CFP and proprietor of Apex Financial Services in Atlanta.
“The query for the markets turns into how a lot progress in direction of the two% aim must be made earlier than they take their foot off the rate improve pedal?” Baker requested. “Secondarily, simply how a lot ache will there be on the way in which?”
Despite falling gasoline costs, inflation was higher than expected in August, and rising prices stay a difficulty for buyers, even increased earners.
Indeed, practically two-thirds of Americans making $100,000 or extra are “very involved” about inflation, in line with a recent CNBC poll.
It’s a prime concern “slicing throughout all age teams,” mentioned Marguerita Cheng, a CFP and CEO of Blue Ocean Global Wealth in Gaithersburg, Maryland.
While retired shoppers fear about rising health-care and long-term care prices, shoppers with youngsters might stress about paying for college, she mentioned.
He has bought gold, utilities and shopper staples whereas rising money and lowering know-how positions.
“This is not the yr to strive and kill it,” Johnson added. “You simply wish to restrict the injury proper now.”
While Baker doesn’t mean main modifications, there could also be “good alternatives” — reminiscent of actual property — amid comparatively high inflation as a consequence of yield and appreciation, he mentioned.
And Cheng has been eyeing stocks paying dividends, which are a part of firm income despatched again to buyers.
“We’re not in search of high flyers,” she mentioned, choosing firms with sturdy financials with a historical past of accelerating dividends.
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Meanwhile, some shoppers are keen to seek out secure locations to park money whereas preserving their buying energy.
For security, Cheng suggests online high-yield savings accounts, particularly with the Fed’s newest rate hike.
“That’s nonetheless an incredible alternative for those who have not taken benefit of it but,” Baker mentioned.
Of course, there are two downsides: You cannot contact the cash for no less than one yr, and you will hand over three months of curiosity by redeeming inside 5 years.