Consultants say jobs, house prices and market volatility are client concerns


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With soaring inflation and rising interest rates fueling speculation that a recession is looming, it may come as no surprise that financial advisors hear these concerns from their clients.

Year-on-year inflation eased slightly in August to 8.3% from 8.5% in July, but still significantly higher than The Fed’s target rate is 2%.. The central bank raised its key interest rate in September by 0.75 percentage points – for the third time in a row – to combat inflation, and further increases are expected.

We spoke with experts from CNBC financial advisor council To find out what they were discussing with their clients.

So, what is the biggest concern for customers in this economic environment? “What will the business environment look like and what are its risks in terms of unemployment,” said certified financial planner Douglas Bonbarth, president of Bone Fide Wealth in New York, whose clients are largely between the ages of 28 and 42.

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“At this point, it’s speculation,” Bonbarth said. “It’s hard to point to data that says we need to worry now.”

Unemployment still low: The latest US Bureau of Labor and Statistics data shows the unemployment rate for August at 3.7%, up slightly from 3.5% in July.

Memories of the Great Recession still linger

However, some clients have memories of the Great Recession of 2008-2009 and the large-scale job losses that accompanied it. In December 2007, before the economic troubles caused by the financial crisis, the unemployment rate in the United States was 5%, according to the BLS. It peaked at 10% in October 2009 – several months after the official end of the recession – but it took until 2015 for it to stabilize at 5% again.

Bonbarth said that job market concerns come primarily from clients who work for start-ups that are largely related to technology.

“If you work for a venture capital-backed company, and the last round of capital you raised was six months ago and you’re on your way to a more challenging environment to raise money, you want to consider those risks,” Bonbarth said.

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

The rise in housing prices is also a cause for concern

Rising home prices – in conjunction with the average 30-year mortgage rate of 6.8% as of September 28, up from 3.3% at the start of 2022 – are also causing some concerns.

While there are signs that the housing market is cooling, High prices and high mortgage rates Still causing concern for those looking to buy.

CFP client Louis Barajas recently moved to Miami from Southern California and discovered a housing market that didn’t look much better than what he moved on. In Los Angeles, the typical home — that is, middle-class homes — sold in August for about $972,800, according to Zillow’s Home Value Index. This compares to $356,500 nationwide.

In the Miami area, August home prices rose 30.7% from a year earlier, compared to 15.8% for the nation as a whole, according to Zillow. A typical home in Miami sold last month for $560,200.

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

The client plans to put off buying a home in the hope that prices will go down.

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

Fear of market volatility weighs on some customers

Meanwhile, some clients are wary of volatility in the stock market – especially those who are retired and who rely on savings to fund their post-working years.

The S&P 500 . Indexa broad measure of US corporate performance, fell more than 14% in the past 12 months through September 28. Dow Jones Industrial Average It slipped over 13% in that time, and it’s tech heavy Nasdaq Composite Index It lost more than 23%.

“The biggest concern for my clients is the uncertainty in the world,” said Carolyn McClanahan, CFP, founder of Life Planning Partners in Jacksonville, Florida. “They are wondering ‘what next’ and how it will affect the market – so it’s similar to being afraid of market volatility.”

For older clients, their portfolio risk is already low “so market volatility will not affect their life goals,” she said. “But we have three or four retirees recently who want to know if they are [spending level] Fine.”


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