VIDEO: Market panics, shrinking 401Ks. What should you do? Market panics, shrinking 401Ks. What should you do?
ORANGE COUNTY, Fla. — Fresh off the economic uncertainty that followed the shutdown of 2020, many investors hoped 2022 would continue a roaring stock recovery that sent markets to new highs.
Instead, the markets experienced one of their worst starts to the year since the Great Depression, with stocks generally heading in one direction day after day: down.
It has left financial analysts searching for guidance.
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“Inflation was really, really rough last year. It seemed like everything seemed to go up substantially,” said Keith Heritage, owner of Gainesville-based Heritage Financial. “Whenever the Federal Reserve raises rates [in reaction]you’re always going to have some type of market reaction.”
Heritage likened the ongoing crash to a reset, where high valuations by investors confident in future profit growths are reevaluated. Lower expectations cause dollars to be shifted to safer investments until the storm passes.
So far, the fall of the markets has been the only sign of looming trouble. Price increases have only slowed down slightly, though some people are now watching their spending as their retirement accounts shrink.
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Heritage said nothing over the past two years has followed any sort of pattern, but the same old advice applies: stay calm. If your accounts are in the network, try to ride them out if possible.
“Every time we see clients or people panic, [he or she] usually doesn’t make a good decision,” he said, adding that downturns have been experienced in all but a handful of years since the century began. “Generally, the market will overreact both ways — on the way up and on the way down. It generally overreacts fairly dramatically.”
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Heritage said this downturn could last until the end of the year, especially because it’s an election year. Investors hate uncertainty, he added, and markets usually rise after ballots are counted.
“I don’t think it’ll be all the way down through the entire year, and I don’t think it’d be all the way up,” he said. “It may be back and forth quite a bit until the Fed is done raising rates.”
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