Employment, home prices, market volatility are client concerns, advisers say

Daniel Acker | Bloomberg | beautiful pictures

With high inflation and soaring interest rates fueling speculation that a recession is on the horizon, it may come as no surprise that financial advisors are hearing these concerns from their clients.

Annual inflation eased slightly in August to 8.3% from 8.5% in July, but it is still much higher than The Federal Reserve’s target rate is 2%.. The central bank raised its key interest rate in September by 0.75 percentage points – the third time in a row – to combat inflation and is expected to increase further.

We spoke to experts from CNBC’s Financial Advisory Council to see what they are discussing with their customers.

So, what are the big worries for customers in this economic environment? “What will the work environment be like and what are their risks when unemployment strikes,” says certified financial planner Douglas Boneparth, president of New York-based Bone Fide Wealth, whose clients primarily between the ages of 28 and 42 said.

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“At this point, that’s speculation,” Boneparth said. “It’s hard to point to the data that says we need to be concerned right now.”

Unemployment rate remains low: The most recent data from the US Bureau of Labor and Statistics shows the unemployment rate in August was 3.7%, up slightly from 3.5% in July .

Memories of the Great Recession still

However, some clients have memories of the Great Recession of 2008-2009 and the widespread job losses that came with it. In December 2007, in the face of economic hardships caused by the financial crisis, the US unemployment rate was 5%, according to the BLS. It peaked at 10% in October 2009 – months after officially ending the recession – but it wasn’t until 2015 that it returned to 5%.

Boneparth said concerns about the labor market come mainly from clients who work for startups that are largely technology-related.

“If you work for a venture-backed company and your last round of funding was six months ago and you’re entering a more challenging fundraising environment, then you should think,” says Boneparth. to that risk.

The same goes for someone considering leaving a secure job for a higher-risk one, he said.

High house prices also create suffering

High home prices – coupled with an average 30-year mortgage rate of 6.8% as of September 28, up from 3.3% at the beginning of 2022 – also cause some anxiety.

While there are signs that the housing market is cooling down, High prices and rising mortgage rates still frustrating for buyers.

One of CFP’s clients Louis Barajas recently moved to Miami from Southern California and discovered a housing market that didn’t look any better than he moved into. In Los Angeles, the typical home – i.e. mid-floor housing – in August sold for about $972,800, according to Zillow’s home value index. That compares with $356,000 nationally.

In the Miami area, home prices rose 30.7 percent in August from a year earlier, compared with 15.8 percent nationally, according to Zillow. The typical Miami home sold for $560,200 last month.

“My clients can’t believe how expensive homes are in Miami,” said Barajas, president and partner of MGO Private Wealth in Irvine, California.

Customers plan to delay buying a home in the hope that the price will drop.

“Some clients remember the 2008-2009 recession when property values ​​fell a lot,” Barajas said.

Some customers are afraid of market volatility

Meanwhile, some clients worry about stock market volatility – especially those who are retired and rely on savings to fund their post-work years.

The S&P 500 Indexa broad measure of how US companies are performing, down more than 14% in the past 12 months through September 28. Dow Jones Industrial Average fell more than 13% during that time and Nasdaq Composite Index lost more than 23%.

“The biggest concern for my clients is all the uncertainty in the world,” said CFP Carolyn McClanahan, founder of Life Planning Partners in Jacksonville, Florida. “They wonder ‘what’s next’ and how that will affect the market – so they fear market volatility.”

For older clients, their portfolio risk is already low “so market volatility won’t affect their life goals,” she said. “But we’ve had three or four recent retirees who want to know if they have [spending level] It’s Okay. “


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