Investing for the Long Uncertainty Ahead
Don’t be fooled by last week’s rally. The outlook for when and how investors can start to rebuild their retirement savings is grim
By David Bogoslaw
Economists are characterizing the current financial crisis as everything from the Great Recession to possibly something on the scale of the Great Depression of the 1930s. Just how long will the pain and uncertainty last? Nobody knows. With the jobless rate expected to keep climbing, consumer spending, a key prop of the U.S. economy, may not rebound anytime soon. Meanwhile, Washington has yet to articulate a viable solution to the banking morass. That makes the odds for a recovery within the year or even the next two look worse with each passing day.
The implications for when and how investors can start to rebuild their retirement savings are equally grim. Let’s be honest. Investors probably don’t want to listen to anyone telling them to stay the course and stick with the classic asset allocation at this point, after a nearly 60% plunge in the major stock indexes from their October 2007 peaks.
Don’t be fooled by last week’s stock-market rally. Yes, it was the first time stocks ended higher on four consecutive days since November 2008, but ask yourself: What on the economic horizon has substantially changed since then? Unfortunately, very little.
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