The rules of money and finance changed last year.
If we look at a chart of the S&P 500 going back to the early 80s, the picture is clear as day—stocks only went up over time.
Sure there were plenty of “dips”. But from 1982 on, we could buy a simple mutual fund or index fund and two years later we would have made money. Fifteen years later we would have made a lot of money.
Meanwhile, if we were to overlay a chart of the 10-year Treasury rate – the opposite is true. Interest rates only went down over time.
That dynamic – stocks go up, rates go down – was largely thanks to the Federal Reserve (the Fed). It had a hand in both via “loose” monetary policy.
But the game’s over.
The Fed pivoted in 2022. And Fed Chair Jerome Powell made it abundantly clear that he will no longer push interest rates lower to support the stock market.
And that means The Age of Paper Wealth is over.
We’re in uncharted waters here. Nobody under the age of 60 has been an adult in a world in which the Fed didn’t push stocks up and rates down.
So to me, the big takeaway is that we have to rethink financial planning 101. And I’m talking about the entire “nest egg” approach to retirement.
Continue reading “The Rules of Money Changed”