Market Recap:
The first quarter provided a bumpy ride, but both stocks and bonds ended the quarter with gains. Financial markets digested multiple issues in Q1 including stress in the U.S. and European banking systems in addition to continued inflation pressures. In mid-March, profitability concerns and demand for dollars drove runs at several regional banks and led to some notable failures. The government stepped in to stop the panic, but last year’s increases in interest rates still present challenges in both U.S. and global banking systems. Inflation rates have slowed after reaching a peak of 9.1% annualized increase last year, but price increases in the services sector have remained persistent. With major central banks still raising interest rates and Leading Economic Indicators continuing to decline, uncertainty remains high. Many economists are predicting a recession in 2023, including some members of the Fed. Stock and bond markets seem to swing between optimism of avoiding a recession and the positioning of assets to be ready for one. Time will tell if a recession does bring slower growth to the economy, but if it does, investors should enjoy a great opportunity to purchase stocks at better valuations.
Emergency Savings - How Much is Enough?
Everyone talks about having emergency savings, but we’re often asked how much is enough? We suggest saving at least three to six months of your monthly expenses. We generally advise homeowners to be on the longer end of that period and renters can be on the shorter end. It’s important that emergency savings funds be placed in relatively stable accounts that can be accessed easily without incurring taxes or penalties. Retirement savings are never a good emergency fund as those savings, when withdrawn early, can cost you both taxes and a 10% penalty. You also want to avoid market risk with your emergency savings.
The goal is to tap your emergency savings only for expenses directly related to an unexpected emergency. When you do have to take money from this fund, it’s important to immediately start rebuilding it. Remember: If you start saving now, the money you save today can go a long way towards meeting your needs when the next emergency occurs.
Call your plan’s advisor with any questions!