Grow savings, long-term investments in 2023, financial experts say

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Consumers and investors have many questions about where the economy is headed in 2023.

Will inflation finally return to a reasonable level, and with it the prices of gasoline, groceries and other goods? Should we expect higher mortgage rates?

What about retirement accounts? Can investors count on recoupling losses seen in 2022?

Are we in a recession or is a recession coming?

Federal Reserve Chairman Jerome H. Powell was asked what awaits the economy after another rate hike aimed at curbing inflation.

“I don’t think anyone knows if we’re going to have a recession and if we do, a deep recession,” Powell said on December 14. After the last meeting of the Federal Open Market Committee in 2022. “This is unknowable.”

Her impossible to say sensitively to what the future holds for the economy when it comes to consumer prices, inflation, interest rates or the stock market. That said, I thought it would be helpful to survey some financial professionals about their new year predictions.

Opinion: 15 reasons to be hopeful for 2023

Greg McBrideBankrate’s chief financial analyst focuses on Fed’s continued use of rate hikes To reduce inflation to 2 percent. In the 12-month period ending in November, annual inflation was 7.1 percent.

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“2023 will be the year when all of the Fed’s actions in 2022 are felt,” McBride said of the central bank’s campaign, which includes seven hikes ranging from 0.25 to 0.75 percent. Unfortunately, we will feel the economic pain without seeing the return of low inflation,” he said.

McBride said to expect and prepare for an economic slowdown or recession by getting your finances in order now and tracking your spending to hold yourself accountable.

Carolyn McClanahanJacksonville, Fla. He sees 2023 as the year of savings. Rates are increasing for deposit accounts and customers should consider shopping for higher rates. interest for checking or savings accounts.

“In 2023, people should make it a goal to have a good emergency fund,” he said. “The rates are very good right now”

McClanahan said there One might talk more about an “inverted yield curve”, when does that happen? short-term bond interest rates long-term bonds.

In a normal economic environment, short-term interest rates are lower than long-term interest rates. “We can’t predict the future, but almost every inverted yield curve ended in a recession within a year. Be careful though – past history doesn’t always guarantee the future.

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If a recession is imminent, what can you do?

“Having a healthy emergency fund is a great way out of a recession,” said McClanahan.

What’s next for the economy? 10 charts showing where everything stands.

Ernest BurleyA certified financial planner and owner of Maryland-based Burley Insurance & Financial Services, he weighed in on the stock market, which has been shaken by several factors – the ohmron variant of the coronavirus, the Russian invasion of Ukraine, high inflation, rising interest rates and global supply chain problems.

“No one knows where the stock market will be next year,” he said. “If someone tells you they know, run the other way.”

Still, Burley hopes investors will see some recovery. Continue to contribute to your retirement plan, but make sure your allocations and portfolio are age-appropriate and include quality investments.

“Stay away from fringe and highly volatile investments,” he said. “Keep it simple. Stack of cash. Contribute to your long-term investment plan.”

Perspective: Some recent advice: Beware of cryptocurrencies and CEOs like Musk

Christine BenzMorningstar’s personal finance manager says he’s out of the short-term forecasting business.

“The stocks look relatively attractive to our team,” he said. “But it’s impossible to say if they’ve hit the bottom, especially as recession concerns come to the fore. I think investors can feel pretty good about the long-term prospects of stocks, but if you’re going to hold them ideally for 10 years or more, it’s still important to have a nice long-term horizon.

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Benz said one thing is for sure – 2022 highlights the importance of retaining at least some cash investments, especially for retirees and others with near-term expenses.

“Holding emergency reserves is particularly important if we encounter a recessionary environment,” he said. “While the employment picture is still pretty strong, we may see some weakening there, and job loss is one of the main reasons people keep at least some cash.”

Dan EganThe managing director of behavioral finance and investment for Betterment, a digital investment advisory firm, urged investors to view 2023 as a transitional year to better times.

“If the financial markets teach a consistent lesson, it’s that using what’s happened recently as a guide for next step has never worked out well,” Egan said. “Tomorrow’s concerns will be different from today’s concerns. Yes, it sucks right now, but that’s usually the turning point for the next revival.”

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