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Recession & S&P 500 History

Ten questions that may be on your mind 

  1. Has anything changed based on the current market volatility and conditions, or should I change my investment style or asset allocation to accomplish and maintain my financial goals?
    • No.  Your investments and asset allocation are based on the financial plan we put together, looking at your goals, whether they are short-term, intermediate, or long-term retirement goals.  Albeit it may be painful to look at the current,
  2. What is MJT & Associates focusing on based on today's market conditions?
    • We are watching the relationship between the Federal Reserve (Fed) fighting interest rates and the impact of rising interest rates.  We believe that we should have a better handle on interest rates and their direction with more data in the next month or so.  As interest rates begin to stabilize, this will set the stepping stone for the market and economy to move forward.
  3.  What is the Federal Reserve's primary function?
    • The Fed's primary goal is to control unemployment and inflation.
  4. Where will interest rates go?
    • Nobody knows, but the Fed has stated that they have a target of the Fed Funds Rate of 3-3.25%.  The Fed Fund's rate is when commercial banks borrow and lend their excess reserves to each other overnight.
  5. When will inflation come down?
    • Eventually, but it will take time.  The Fed's current track is to have inflation down 4-5% by the end of 2022, hitting its 2.5-3% goal by 2023.
  6. Are we going into recession?
    • If it is up to history, the answer is yes.  With inflation reaching 8.26%, as of 5/19/2022, the Fed is trying to get it under control and sustain them.  A recession is two successive quarterly declines in the gross domestic product (GDP), a measure of the nation's output.
  7. How often do recessions occur in the U.S.?
    • The average recession before 2007 lasted about 11 months, the Great Recession lasted 18 months, and the 2020 recession lasted just two months—the shortest on record.  A chart shows the growth of $10,000 invested in S&P 500 Total Return (reinvestment of dividends occurs) and the history of U.S. Recessions since 09/11/1989.
  8. What do we do over the next few months?
    • The portfolio, investments, and asset allocation are reasonable and will continue to accomplish your goals and objectives.  Albeit is hard and maybe painful to watch your balances fall, your investment programs are working and will come out of this downturn as they have in the past.  
  9. Can things change?
    • Absolutely but having a long-term mindset with a financial plan to navigate to and through your goals and aspirations is critical.  We change your financial plan and investment strategy as your goals and values change.  MJT & Associates monitors and watches the economic data and market conditions, so you don't have to or in collaboration with you.
  10. What's next?
    • I believe it will be bumpy over the next few months.  Short-term volatility is sometimes hard to watch and can breadth the thought of many what-ifs; however, long-term perspectives and outlooks are needed to ensure you win the marathon, not the sprint.