Talk about “seeing red.”
As of June 16, of this year, the markets entered bear market territory.
The Dow Jones Industrial Average has lost 18%.
The broader S&P 500 Index is down 23% and the NASDAQ Index — which includes most Technology companies — is down 32%.
The last bear market for the S&P 500 lasted from Feb. 19, 2020 through March 23, 2020.
The index dropped 34% in a one-month period. It was the shortest bear market in history, due to the panicked response to COVID-19, and its resultant unknowable global implications.
Today, we are dealing with the highest inflation in four decades and rapidly rising interest rates. Excessively easy monetary policy over many years and President Biden’s gargantuan fiscal spending lit the fire of rising prices in every sector of the economy.
Now, markets are forced to absorb the implications of higher rates, a future recession, and the negative impact on corporate earnings.
This means that the threat to our invested savings — especially 401(k)s, IRAs, and retirement funds such as pensions and other assets — is real and growing.
Almost $10 Trillion in equity market value has disappeared in just a few months; this does not take into account major losses in the bond markets.
The young crypto currency markets have never experienced inflation. This new marketplace was significantly more leveraged than many traders and investors realized. The crypto crash adds up to $2 trillion in lost valuation so far — in what is a wild meltdown.
All of this disruption will lead to inevitable finger pointing.
Looking for the chief suspects?
Search no further than a slow moving Federal Reserve and oblivious Treasury Secretary, Janet Yellen. Both seriously missed the mark on sound economic management.
The Biden administration has also consciously avoided facing economic reality for too many months. The consequences of a “head in the sand” political approach and mindless climate change platitudes are now all too clear; they spell disaster for pocketbooks, savings accounts, and our individual and collective financial futures.
Economist Mohamed A. El-Erian rightly notes, “I was very puzzled when a year ago so many people were so confident that inflation was transitory. There was too much we didn’t understand about the post-COVID inflation so a bit of humility would have been a good idea.”
The only experienced and high profile Democrat willing to warn of the oncoming train wreck was former Clinton Treasury Secretary Larry Summers, who this past Sunday continued his truth tour and warned of a possible painful recession within two years.
We all face tough choices ahead — particularly millions of low and middle income households.
Vanguard recently released its annual blockbuster survey of all the millions of retirement plans it manages. It’s called How America Saves, and the conclusions drawn are both enlightening and alarming.
While it shows the “average” American worker has a 401(k) balance of $142,000, this number is skewed by adding together all households including extremely wealthy accounts.
The more accurate median measure (literally the data in the middle of the ranking) shows the American 401(k) balance for a worker aged 45 remains at $35,000.
Unfortunately, It has not grown much since 2012.
In fact, many Americans have less than $20,000 in retirement savings.
Countless savers missed an opportunity to grow their nest eggs because the period from 2010 through the end of 2021 was one in which the S&P produced returns of more than 400%,quintupling the money of those who invested in stocks.
Of course, the 2022 losses have not yet been factored into the accounts.
We may never fully understand the poor performance of our current president, Federal Reserve, and current U.S. Treasury Secretary, Janet Yellen.
Or the steady drumbeat of climate catastrophe supported by the Biden administration, an agenda which has led to our nation’s massive energy shortfalls and sky high gasoline, diesel fuel, and natural gas prices.
The bumblers on Team Biden are seemingly merely grateful to have their cushy jobs and just “phone it in,” on a daily basis.
As we absorb the latest Federal Reserve 75 basis-point rate hike and glance at our investment statements, yes, we may require some prudent financial decisions and belt tightening.
We should also be ready to think carefully about how we can choose and elect better leadership at the nation’s helm in the future, for our futures.
Clara Del Villar is Director of Senior Initiatives at FreedomWorks Foundation. Her financial industry career includes senior roles in Investment Management, Private Asset Management, and Capital Markets. She is Founder and CEO of The Hispanic Post, and founded InEnergy. She is a former adviser at 60 Plus Foundation. Currently, Ms. Del Villar is a Board Director at General American Investors Co. and on the Executive Committee of Weill Cornell Women’s Health Symposium.
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