Sept 2022, when the economic markets worry you

The last few weeks have seen a lot of economic changes and turbulence. In particular, there’s a downshift in US and global financial markets over the last month, which is a big “risk” flag flying around all things money.

I’ll summarize some of what is happening, and why, and then go on to tell you what it means, and what you might consider doing related to it.

What’s up with the US stock market, and why:

  • Unemployment is staying low; this is a good thing overall; August saw a lot of job gains. but bigger public companies subject to investor pressure to make money are doing layoffs.
  • Inflation is staying the same, not lessening [yet]. It’s hard to reach because the numbers get reported annually not monthly, and yet it is month-over-month slowdown economists are looking for.
  • Interest rates are going further up, because the US Federal Reserve is using them as a tool to combat inflation, under the hypothesis that making it harder to borrow money will slow spending enough to bring inflation in line.
  • In the US, a midterm election, and elections generally add uncertainty [will someone get elected who is going to change fundamentals?], which adds volatility to stock investment markets in particular. And our last few election cycles have been riddled with lies about their veracity [good folks have worked hard to make voting quite secure], and the anxiety that comes with living in a post-Jan-6 United States.
  • A war [though there is kind of always a war, this is a war impacting white people, eg westernized countries in Europe, who are in a world of pain with energy costs. Plus, England’s pound and government bonds crashed the other week after their new conservative gov’t announced a plan to slash taxes for the rich, which means austerity and less services eventually – and a cost of living crisis, now
  • A manufactured oil shortage — OPEC met in early October, and decided to reduce oil production by 20%. That is going to drive prices up, hitting folks paying for energy to heat homes as well as drivers, across the globe.
  • US stocks’ values are volatile, and in a bear market, meaning their value is more than 20% down on average. They are “down” because companies are earning less, related to supply chain and inflation. Now big companies are still earning LOT, just not in line with the imperative to always be earning MORE. The last two years were great for companies that supported indoors, digital experiences, and that is shifting as people re-emerge. Because stock values are down, stock portfolios have less value – so there’s less wealth all around. 

Here’s what that means:

  • Stock portfolios being down means that any organization or person needing to use money that’s in stocks or stock funds is redeeming for sale at a lower price than a year ago. Ideally, the stock or stuck fund was bought long enough ago that a sale would still gain money [eg, bought it in 2017 for $30, selling today for $45, last year it was worth $55]. Even still, behavioral economic tells us we find it uncomfortable to perceive a loss.
  • Importantly, any organization that has an imperative to give money, usually gives a percentage of total portfolio. As totals go down, institutional giving goes down, too. 
  • On a good note for once billionaires are not getting quadratically richer BUT on a bad note anyone else with money in stock investments also has less value in their portfolio than a month ago and a LOT less money than a year ago 
  • AND on another good note that only impacts you if you were about to use that money — if you were planning on cashing in some of a stock portfolio for something in the coming year[s], you have less resources to put to that, now.
  • So, friendly reminder, it’s good to have money you want to use in the next 6 months to 2 years OUT of stock investments [for next time, and there will be a next time!]
  • Job numbers … WORKER POWER and just a reminder unless you own means of production, you too are a worker <3. For fucks sake we need an economy that is designed so that workers can advocate for enough money to live, not one in which companies should always be able to just find someone else to work for a too low rate. 
  • Raising interest rates is not really working, and it’s unclear why they are using this tool, when they’re in an unprecedented scenario [high unemployment/high demand for workers, a segment of the population has enough money to handle inflation and another segment is struggling and increasing debt costs is making it harder on them] — in the meantime, mortgages are hovering near 7%, which is over the 6% bar. Also adjustable debt like credit cards or adjustable mortgages, and new debt like a student loan or car loan is more expensive
  • Real estate! Prices are not going up drastically anymore, in some bigger cities there have been price pullbacks of 3-9%, and it costs about $700/month more to buy a median-priced house [that’s $421k] in 2022, than it would have in 2021. I suspect until interest rates go back down, we’re going to see slowness and weirdness in the housing market.

    AND, if you’re out on these streets trying to buy, you can probably get a seller to pay for points to get your mortgage down into a 5+% range, which will make it more affordable and less likely you’ll feel urgent to refinance.

Given all this, what can I consider doing?

In general, this is still a good moment to get a job and if you were thinking about shifting jobs, do it — just know that a job with a fortune-500 company is going to be harder to come by. And, if you haven’t switched jobs or raised rates in the last 2 years, you need to be looking for a 10% bump to be ablate afford what you could in 2020. 

I have heard two questions a lot from clients lately: is now a good time to invest, and where do I put my money if it’s not?

Depends on your timeline, friends – you might want to slow spend and save a bit more cash on hand in high yield savings account or a US inflation-adjusted iBond, in case you too lose your job or things just keep rising in price and you need a cushion.

You also might want to put some of that cash somewhere it can do some good, like a social impact fund or into community investing. It won’t make stock market returns. But it also is unlikely to tank…

Or, you might want to swing big and invest, remembering that investing is for money you don’t plan to use in 3-5-10+ years. As we all saw this month, you can lose more value after you’ve already lost. But you only lose that value forever if you sell. Hypothetically, this could be a good time to get some stocks “on sale” as it were — remembering that there’s an election coming up that’ll add volatility to the market in the next month.

To bring it back to vigilance energy: I perceive, I consider, and I take action to care for myself.

Perceiving: It’s choppy waters out there, and we’re all in this boat. In a way, everyone in our current systems is surviving trauma: the nonconsent of work, the gaslighting about our environmental decimation, the exhaustion of all the decisions to be made about money.

Considering: You can’t change it all. You can change a few things. Which would you like to work on first?

Taking action to care for yourself: If you’re reading this, you know how to take action and how to care. Take it one step at a time. You got this. 

You can join a money like you mean to cohort or sign up for 1:1 coaching if you want support. Or get with a friend or partner and be accountabilibuddies for each other to get your things done.