• Skip to main content
  • Skip to primary sidebar
  • Skip to footer

Retirement Field Guide

Retirement Action Plan

  • About
    • About Ashby
    • Who We Serve
    • Contact Us
    • Disclaimers

The Retirement Field Guide

Home Link

Thinking Out Loud

by Ashby Daniels, CFP®

Hi there folks. It’s been quite a while since I posted anything new here. Some of you have probably forgotten you even subscribed. Anyhow, I had a thought I wanted to share with you regarding much of the government-infused capital into our economy over this past year. But first, a prelude.

The primary reason many investors shun equity investing is the perceived risk associated with equities. For what it’s worth, it’s only a perceived risk because, as I define it, real risk is the risk of a permanent loss of capital which is something that has literally never happened. In fact, the exact opposite of that is what has occurred during the life of retirees today. For those who are counting, the market is up almost 100X during the life of today’s 65-year-old, not even including dividends. Wild statistic, no? This is what investors are so afraid of?

Maybe I’ll write more about the wild irrationality of the avoidance of such an asset class another day. What scares investors though is the major market collapse. Forgetting for a second that they have historically all been temporary in nature, the major market collapse is what I want to touch on now and how this infusion of government capital may work in the years to come.

Given the number of pundits (always) predicting a crash of 1929 magnitude, I thought it would be an interesting exercise to question whether a crash like that is even possible in the future. I’ll say that unequivocally, yes, anything is possible. But that doesn’t mean that it’s likely.

One thing we learned through the COVID pandemic is that when the world turned upside down and the economy shut down, the government flooded the economy with money. They drastically expanded unemployment benefits and placed funds directly in the bank accounts of qualified individuals to the point that household savings today is near an all-time high.

While there are folks who believe they went too far and certainly others who believe they missed the mark entirely, I’m not making an argument on either side.

My hypothesis is simply this: When (not if) a major market or economic downturn occurs again, it seems likely that the public response will practically demand government action to again flood businesses and the American public with funds.

Once the cat is out of the bag, it’s extremely difficult to put it back in.

Invariably there will be long-range negative impacts caused by this expectation. Impacts on deficits, the national debt, inflation (as we’re already seeing), and maybe even increased risk and leverage on the part of the economic system knowing that such a bailout may now be the expectation.

Who knows what will come of this; I’m not speculating. Certainly, I believe short-term downturns are inevitable. But I’m wondering whether the government’s response to the pandemic has completely changed the game. It’s got me thinking, that’s for sure.

Stay the course,
Ashby

This post is not advice. Please see the additional disclaimers.

Filed Under: General

Primary Sidebar

Search Blog

Categories

Archives

Footer

Join the Retirement Field Guide Newsletter

Subscribe to get our “Preparing for Retirement: Seven Essentials for Successful Investing in Retirement” whitepaper!

We won't send you spam. Ever. Unsubscribe at any time.

  • This field is for validation purposes and should be left unchanged.

Follow us:

LinkedIn

  • 600 Waterfront Dr Suite 125,
    Pittsburgh, PA 15222
  • (412) 742-4861
  • Email Me

Large Map Directions

Securities offered through Raymond James Financial Services, Inc., member FINRA/SIPC. Raymond James financial advisors may only conduct business with residents of the states and/or jurisdictions for which they are properly registered. Therefore, a response to a request for information may be delayed. Please note that not all of the investments and services mentioned are available in every state. Investors outside of the United States are subject to securities and tax regulations within their applicable jurisdictions that are not addressed on this site. Contact our office for information and availability. Retirement Field Guide and Shorebridge Wealth management are not registered broker/dealers and are independent of Raymond James Financial Services, Inc. member FINRA / SIPC. Investment advisory services offered through Raymond James Financial Services Advisors, Inc. Links are being provided for information purposes only. Raymond James is not affiliated with and does not endorse, authorize or sponsor any of the listed websites or their respective sponsors. Raymond James is not responsible for the content of any website or the collection or use of information regarding any website’s users and/or members. Raymond James Corporate Privacy Notice.
FINRA BrokerCheck

Copyright © 2022, Retirement Field Guide. All Rights Reserved.  |  Privacy Policy  |  Design by Tinyfrog Technologies.

We use cookies on our website to give you the most relevant experience by remembering your preferences and repeat visits. By clicking “Accept”, you consent to the use of ALL the cookies.
ACCEPTREJECT
Privacy & Cookies Policy

Privacy Overview

This website uses cookies to improve your experience while you navigate through the website. Out of these cookies, the cookies that are categorized as necessary are stored on your browser as they are essential for the working of basic functionalities of the website. We also use third-party cookies that help us analyze and understand how you use this website. These cookies will be stored in your browser only with your consent. You also have the option to opt-out of these cookies. But opting out of some of these cookies may have an effect on your browsing experience.
Necessary
Always Enabled
Necessary cookies are absolutely essential for the website to function properly. This category only includes cookies that ensures basic functionalities and security features of the website. These cookies do not store any personal information.
Non-necessary
Any cookies that may not be particularly necessary for the website to function and is used specifically to collect user personal data via , ads, other embedded contents are termed as non-necessary cookies. It is mandatory to procure user consent prior to running these cookies on your website.
SAVE & ACCEPT