Since the beginning of the year, financial markets have been erratic, fuel costs are rising, inflation has been growing and there is talk of rising interest rates. Now with the Russian invasion of Ukraine in Europe, what is the outlook for the US economy?
The United States has recently banned fuel imports from Russia, which will lead to an increase in overall fuel costs, but fuel costs were already rising due to the economic sanctions being imposed on Russia from most of the Western countries. Russia amounts to less than 10 percent of the United States fuel imports and will have a lesser impact than European countries.
Inflation has already been on the rise and the economic consequences of the war in Ukraine could possibly slow down economic growth in the US, but it should not be enough to trigger a recession or wipe out the rapid gains made in the economy as the country recovers from the pandemic.
Job growth is much stronger than anticipated with the February jobs report showing an increase of 678,000 jobs versus an anticipated growth of 440,000. Unemployment has dropped to 3.8 percent.
Recovery from the pandemic is progressing at a much more rapid pace than the 2008 financial crisis. Twenty-four months after the beginning of the pandemic, employment levels are 1.4 percent below pre-pandemic levels, where it took 67 months following the 2008 financial crisis to reach the same levels. Unemployment may drop even further since there are almost 11 million job openings currently, which is 1.7 job openings for each unemployed individual
Another reason to believe in the strength of the US economy is the amount of money Americans have in savings. According to Bank of America, Americans have 19 trillion dollars in savings, which will allow for their ability to withstand the effects of inflation.
The United States has limited economic ties with Russia and the size of the Russian economy at 1.48 trillion is smaller than France at 2.63 trillion, Italy at 1.89 trillion, and Canada and South Korea each at 1.64 trillion. The effects of the war and economic sanctions will be far less for the United States than for European countries that have a much higher reliance upon Russian fuel sources. Your investment and retirement statements will show volatility as the markets move up and down, but it is helpful to remember that based upon data that goes back to 1896, the DOW gains 2.7 percent the week after the index experiences a 10 percent correction, gains 3.3 percent the month after the correction, 5.2 percent six months after the correction, and 8.7 percent a year afterward. (Market Watch 2/23/22).
While investing, patience is a virtue, and you should not make any hasty decisions because exiting the market at the wrong time can lead to unrecoverable losses. Or as Warren Buffet has said, “The stock market is a device for transferring money from the impatient to the patient.” Your investment portfolio should match up with your individual needs and risk tolerance. Money you need today or in the near future should be treated differently than money you intend to access at a later date, such as upon retirement or a child’s education. Having a stable contingency fund allows you to weather out financial storms that are based upon either your own individual circumstances or national or worldwide economic issues such as we are experiencing today.
If you would like a complimentary analysis of your investment and retirement planning needs, please feel free to reach out to me to schedule a quick virtual meeting. Why wait to do something that should be done today.
The above is the opinion of the author and should not be relied upon as investment or legal advice or a forecast of the future. It is not a recommendation, offer, or solicitation to buy or sell any securities or any investment strategy. It is for informational purposes only. The above statistics, data, anecdotes, and opinions are assumed to be true and accurate. Grand Canyon Wealth Management does not warrant the accuracy of any of these.
Michael J. Day CPA PFS™ is the founder of Grand Canyon Wealth Management, where he provides financial planning, estate planning, wealth management, insurance, and investment services. For more information, or to schedule a complimentary consultation, visit grandcanyonwealthmanagement.com, call (480) 590-3590, or e-mail Michael.j.day@lpl.com. You may also follow him on Twitter @GrandCanyonWM. Securities and advisory services provided through LPL Financial, a registered investment advisor member FINRA/SIPC. Grand Canyon Wealth Management is not an affiliate company of LPL.