We’ve seen the stock market rise to record highs recently, but how long can this last? 54% of American investors see the stock market heading for a crash, according to a recent Allianz survey.[1] There are a few reasons why we could see a market correction soon, including the Delta variant and higher inflation. Are you prepared for a market correction?

Reason #1 The Delta Variant

There was a return to normalcy as COVID infection numbers fell, but then the spread of the Delta variant began. We could see the economy take a pause on its way to fully recovering. We still saw labor shortages, disrupted supply chains, and a drop in consumer confidence in September.[2]

Reason #2 Higher Inflation

Inflation has been higher than usual recently, and over two-thirds of survey respondents expect prices to move higher in the next year. [3] Inflation can hurt purchasing power, which can weigh down economic growth. The last time the inflation rate was over 5%, the U.S. was in the Great Recession.[4] Consider the long-term impact of inflation on your savings – how much could your purchasing power decrease over the next 20 years? For example, after 20 years with a 2% inflation rate, $1,000,000 would only have the buying power of $672,971.[5]

Why Might You Need to be Concerned?

A market correction could pose a particular threat to you as you near and enter retirement. Two retirees with identical wealth and long-term market averages in retirement can have very different financial outcomes depending on the state of the economy when they begin retirement. Someone retiring during a bear market might see their portfolio recover as the market does, but they may also see a reduction in the overall return of their portfolio because of how much they had to withdraw early on when prices were down. Have a plan for how you would handle a retirement curveball like a major market correction.

Work with us to create an investment strategy designed to fit your risk tolerance and retirement lifestyle goals. Retirement shouldn’t be a time of anxiety or worry; it should be a time when you feel financially secure and can enjoy the money you’ve worked hard to earn for decades. Sign up for a time to talk to us about how we can help.