Local wealth advisers offer advice and words of caution

Moving into 2023, inflation, interest rates and the economy continue to be on investor’s minds. It’s not all doom and gloom—good things are happening as well. We spoke to several area wealth management experts who offered insight on the year ahead.

According to Jason M. Katz, wealth adviser and principal at Bartlett Wealth Management, “Right now, we’re experiencing elevated inflation and higher interest rates, which have created volatility in the markets in 2022. On the positive side, equity valuations are back down to long-term averages, bond yields are once again attractive and the labor market continues to be strong. On the negative side, we have higher interest rates, an energy crisis in Europe, geopolitical issues as well as a pressure on corporate earnings from inflation.

“In terms of the financial markets, 2022 has been a year of great market volatility, while 2021 was a year where most investments worked well and there was very little volatility. In fact, those who were new to investing in 2021 may have come away thinking that investing is quite easy, and investments will always go up. For those of us who have experienced volatile markets in the past, we know that 2021 was an anomaly and 2022 has reminded us of that.

“Looking forward, we’re continuing to keep our eye on inflation, interest rates and the economy. Inflation is elevated right now, which has a ripple effect on many areas, including interest rates and the economy. We will be watching what the Federal Reserve will do in terms of their continued plan to hike short-term interest rates to cool down inflation. The Federal Reserve has a difficult task: cool down inflation while not tipping our economy into a deep, prolonged recession.”

At Bartlett, the bottom line is that discipline is key, Katz says. Trying to predict where the stock market, inflation and interest rates are headed is a fool’s errand. What is more important is building a financial plan that incorporates your goals and informs an appropriate asset allocation according to your cash needs and risk appetite.

John VanWeelden, president, VanWeelden Financial Group, agrees inflation and market volatility are some of the biggest things on investors’ minds right now.

“Inflation is rising at a pace not seen in decades. Along with it, interest rates. That’s having a dramatic impact on the cost of living and cost of borrowing for most people,” VanWeelden says.

“At the same time, stocks and bonds have not both been down this much in the same year since 1969. Since most investors and advisors employ a traditional approach to investing, which relies on bonds as the ‘shock absorber’ for stocks, even those who believe they are conservatively invested are experiencing significant losses,” he says.

“If investors, and especially retirees, continue to believe that asset allocation and diversification alone are sufficient to mitigate the risks we’re facing, they’re going to be irreparably harmed. You have to alter your mindset about investing and discover alternative ways to mitigate these risks. The solutions are out there, they’re just not the status quo,” VanWeelden stresses.