Financial Planners Caution Clients for 2023


Financial Advisor Speaking to Clients | Image by Prostock-studio/Shutterstock

With talks of an impending recession, financial advisors are telling clients to tread lightly.

The stock market finished 2022 with its worst year since the great recession in 2008, with the Dow Jones Industrial Average down 8.8%. The S&P 500 saw nearly a 20% decline, and the Nasdaq saw a 33.1% slide.

With the market’s uncertainty, many financial advisors are telling their clients to tighten their belts regarding spending.

“A lot of people are gonna have to come to terms with the fact that they have to make some changes in their lifestyle,” said Bill Dendy, certified financial planner at Raymond James.

Sky-high inflation and aggressive rate hikes from the Federal Reserve impeded growth and technology stocks and affected investor attitudes throughout the year, according to CNBC. Geopolitics and volatile economic data have also played a role in battering markets.

As Art Cashin, director of floor operations for UBS, told CNBC, “We’ve had everything from Covid problems in China to the invasion of Ukraine. They’ve all been very serious. But for investors, it is what the Fed is doing.”

While it may be more challenging, one advisor says to keep the noise surrounding the markets from affecting your savings strategy.

“Don’t let the current environment with inflation derail your savings and investment strategy,” Shawna Bradfute, a financial advisor at Edward Jones in Waco, said.

For those who are approaching retirement, portfolios have become a balancing act.

“If they’re about to retire, people are very nervous, worried, anxious about losing money they’ve work[ed] so hard for,” Derrick Kinney, CEO at Good Money Framework, said.

Higher interest rates are making the bond market more appealing for some.

“I am all in for the bond market. I think that’s a great place to be in 2023. This is the first time in a long time that rates and yields have been this attractive. Higher yields mean that folks who use the bond market as their source of income can finally get a raise,” Michelle Griffith, senior wealth advisor at Citi, told Barrons.

Kinney and Dendy both expect the stock market to be volatile as long as inflation is high, according to CBS News.

“If you got time to save, this could be one of the best buying opportunities we’ve seen in quite a while,” Kinney said.

Cashin believes the pain is far from over and could last until the Fed pivots, which does not appear likely to happen soon.

“I would love to tell you that it is going to be like the ‘Wizard of Oz’ and everything is going to be in glorious color in a moment or two. I think we may have a bumpy first quarter, and depending on the Fed, it may last a little longer than that,” Cashin said.

Communication services were the worst-performing sector in the S&P 500 in 2022, dropping more than 40%. High oil prices enabled the energy sector to be the only one in the green last year, gaining 59%.

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