by Dave Kutcher
It is August 2023 and after a lackluster 22’ and a first half of 2023 filled with trepidation for what was going to happen this year, many people have found themselves feeling complacent again, or in some cases, pretty confident and happy about how their retirement accounts have weathered the storm. The word on the street is that a soft landing is upon us as stocks have rebounded and rising interest rates seemed to have steadied. We caution you that the storm is not quite passed…gray clouds remain and while sunlight can be alluring, we would caution you to be careful not to put away your storm implements just yet.
Some financial indicators have given rise to an optimistic market perception. Fear has changed from worrying about huge losses in investment portfolios to fear of missing out on what is happening right now. Money is moving into riskier assets as optimism has increased.
We think the current conditions are the calm before the next storm and if you are nearing or just starting your retirement, we encourage you to heed the gray skies that may be behind your back as you comfortably relax and enjoy the sun on your face.
The current rebound in the stock market is not the fortune teller of good things that you may think. Sometimes specific sectors of the market do well and create unwarranted optimism which translates to further risk taking as folks forget that sometimes the economy and the equity markets aren’t always joined at the hip.
There are holes in the cobbler’s shoes even though the top might seem perfectly shined and without blemish. Monetary policy continues to be tight, and we haven’t seen anywhere near the totality of the impact of where we just were…the impact of higher rates and tightened credit markets can lag and we think credit issues are going to get worse. We expect increases in bankruptcies, more borrowers defaulting on debt and further downgrades for those in need of borrowing to make ends meet.
The commercial real estate market hasn’t seen the worst of things yet and this market segment is tied to insurance and banking. So, poor performance in commercial real estate can have a huge impact on those that participate in this market.
The current calm before the next storm is real. History tells us this is not a time to be complacent. As recently as 2007/2008 a similar scenario existed and we all know how that ended.
Maybe it is a time to reap your 2023 reward and lock your recovery in now, so you are not subjected to what is behind those clouds that remain in the sky. Lagging results are coming and while it may not be as damaging as some prior periods in history, we think the markets are overly optimistic to say the least.
My name is David A. Kutcher, a retired Marine Corp Captain. My business partner in the lower 48 is Richard C. Scott, CLU, LUTCF. For nearly 40 years we have been helping folks with their personal retirement decisions. We encourage you to make an appointment and get ahead of your concerns as early as is possible. You can catch us on the radio every Saturday morning, “Retirement in the Last Frontier”, 8:30-9:30 on AM 650, Keni Radio. Frontier Retirement; 10928 Eagle River Road; Eagle River, AK 99577; (907) 795-7452.
