Financial Planning

Silver Linings of High Interest Rates and Market Corrections

By February 25, 2023 No Comments

We have experienced quite a bit of financial pain in the last year. Between inflation eroding the value of our money and markets seeping into a bear market, it can be difficult to maintain a positive outlook. It has been many years since inflation has crossed that 4% and for many people, this is their entire career. (Inflation History)

At LW Advisors, we are not only thinking about how we can retire well, but how to live well. We believe it is beneficial to look at the bright side of one of the major drivers of the market correction: higher interest rates. Are a few reasons to remain upbeat:

  1. We are finally receiving a decent yield on fixed income. We feel that we are now being compensated in a way that feels more rewarding for the risk taken in the bond market. Higher yields can translate into higher returns to help balance out the fluctuating stock market. *
  2. Insurance companies are offering higher interest rates on products. Fixed annuity rates and income annuity rates may be paying out at a higher rate than they have pre-2008 financial crisis, offering opportunity for conservative investors. You may see the cash value of your life insurance increasing at a faster rate as well.
  3. Encourages smart saving habits. Although rising interest rates can stifle investment opportunities for many people (hence the negative effect on the economy), for others it may be a good opportunity to plan for large purchases.

Are you still looking at your accounts and feeling pessimistic? Here a few positives that have come from us reaching a bear market (20% down from a market high)**:

  1. The average bear market lasts 289 days, a little over 9 ½ months. The market began its downturn January 3, 2022 and was officially called last June. So depending on from when you start counting, we are already well on our way to that mark.*
  2. In the last 20 years, half of S&P 500 index’s*** strongest days were during a bear market, making staying invested possibly more lucrative.*
  3. Since 1928, the average frequency between bear markets is every 3.6 years (much longer than 289 days)!
  4. Since historically, bear markets have always ended, it may be a great opportunity make stock purchases at lower prices*

Have questions on what has changed in your plan given these major economical shifts? Schedule a complimentary introductory consultation with Julia here: In-Person Introductory Consultation Zoom Introductory Consultation

*Investment returns are not guaranteed. Market and yields are subject to fluctuation, examine fund prospectuses for more information.


***The S&P 500 is based on the average performance of the 500 industrial stocks monitored by Standard & Poor’s.

Investment advisory services offered through LW Advisors L.L.C., a Registered Investment Advisor in the state of Iowa.

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