Podcast #20: Perspective on the Investment Market, New Fed Payment System, and Retiring in a Down Market

Listen to the podcast below to hear Jill talk about

• Perspective on the investment market
• The new Fed payment system
• Retiring in a down market

Script:

Hi Everyone,

As has been true most of the year, the market is very volatile, especially on the downside.  A primary tool the Fed uses to fight inflation is interest rate increases to slow the economy down. When that occurs, corporations may not make as much money and more investors sell stock than buy – hence a down market.

When the market will move up more consistently is unknown. What we do, when we put cash to work or re-balance your portfolio is buy more shares at a lower price which works to your advantage when the market turns positive.

According to CNBC, since 1926 the S&P rises 72% of the time. Unfortunately, we’re living through the 28%. Certainly, no fun.

I have discussed on several occasions’ cryptocurrency. While there are multiple reasons why it gained in popularity, one is how it fits with today’s lifestyle. It is instantaneous and operates 24/7. This in comparison to writing a check, and ACH transfer or a wire.

Well, now the Federal Reserve is set to introduce their own faster payment system to compete. I think it is important to the stability of the financial system. Cryptocurrency has little regulation and the valuations, especially seen during this bear market, can have large swings.

So, launching in July 2023, the FedNow Service. According to their Service Readiness Guide, there will be instant payment 24/7 every day of the year. Much of the infrastructure design needs to be with the financial institutions. It is currently being tested with a number of them. Not everyone maybe on board on day 1 but the larger institutions should be part of the rollout.

According to the Guide, the Fed believes financial institutions will be able to develop new products with this system; we as individuals can transfer money immediately and reduce the risk of late fees or overdraft charges; and businesses will gain more control of cash flow.

I want to briefly discuss retiring in a down market. This happened to many in 2000 and again in 2008. When we prepare financial plans, we run what is called a Monte Carlo simulation. 1,000 scenarios are run with varying rates of return including declines to develop a success ratio. What makes this downside risk difficult is just when you plan to retire, the value of your account drops with the market. Pre-retirement you can wait for the market to return. But once retired, you may need to withdraw the money to live on so it is not there when the market goes up again.

Some of the items you might consider if this describes your situation is:

• Work longer if that is possible;
• Before retirement convert some of your assets to cash and short-term bonds so if the market declines, stocks don’t need to be sold to support you;
• Withdraw only what is necessary and save larger withdrawals for discretionary items when the market rises

A quick housekeeping item. We are beginning to see Schwab/TD Ameritrade letters going directly to clients. We don’t always know in advance something is forthcoming. If you receive a letter and are confused, please contact our Operations Group for help.

I wanted to take a minute to update you on my situation. Many of you knew I had another hip replacement. Thank you for your kind wishes.

My first hip replacement in April was a breeze. It was an easy recovery. That has not been true for my second one. While it is very annoying, it apparently isn’t uncommon. And, Bonnie ended up in the hospital so August was a rough month. However, we are both on the mend and looking forward to good health.

Now for some good news.

There is much discussion about green energy companies creating jobs but not many have come to fruition. It seems change is coming. The first commercial-scale off shore windfarm is about to be built. Plenty of workers are needed. Senior Manager Jennifer Cullen at Vineyard Wind in MA said, “We’re combating this sense of, we’ve been talking about it for so long,… is it actually coming? We’re telling people yes, it’s here, it’s now.”

They are looking for employees offering training through the MA Maritime Academy. Safety training is first. The average job pays $80,000.

In Rhode Island, Orsted, a Danish wind developer and utility Eversource are partnering with the state for training in community colleges. So, it looks like we’re on our way to an evolution of retraining workers for the new opportunities of green energy.

As always, please feel free to contact us about your portfolio or if you would like to update your financial plan.