Title: How to Choose the Best Retirement Plan and Navigate the Stock Market Amidst Fed Rate Hikes
As news of inflation easing more than expected in October solidifies the view that the Federal Reserve is done with its most aggressive rate-hike campaign in four decades, many investors are paying close attention to their retirement plans and the stock market. With various retirement savings plans available, including traditional IRAs, Roth IRAs, and 401ks, it’s important to know how to choose the best plan that will help you reach your goals.
According to an analysis by Ryan Detrick, chief market strategist at Carson Group, the S&P 500 index rose an average of 14.3% in the 12 months following the Fed’s final rate increase. Halting rate hikes brightens the economic outlook and makes stocks more attractive than bonds. But what happens when the Fed hikes rates? Rate increases push up the cost of mortgages, car loans, credit card purchases, and other loans, dampening economic activity and eating into corporate earnings. Halting rate hikes does the reverse and removes a big cloud of uncertainty from the market.
While stopping rate hikes fostered double-digit market gains in eight of the 10 rate hike cycles over the last half-century, the S&P 500 suffered steep 12-month losses in two of those episodes. It’s important to consider the historical trends when approaching retirement plans and navigating the stock market amidst Fed rate hikes.
Investors are hopeful for a continued stock market recovery as the Fed stays on the sidelines. However, if the Fed pushes back against that narrative and continues to espouse a “higher for longer” mantra, it could lead to stock market pullbacks. With the potential for future rate cuts to bolster stocks, investors may see continued growth in the medium term.
When considering retirement plans and navigating the stock market during periods of Fed rate hikes, it’s important to keep updated on economic, market, and policy changes in order to make informed decisions about your financial future.