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Forbes
11 hours ago
- Business
- Forbes
How Retirees Can Prepare for Stagflation Risks
Red warning lights are flashing that the U.S. might be entering into a period of stagflation. Key concerns include: What can pre-retirees and retirees do to protect themselves if we experience stagflation? Let's take a look, but first, let's define the term. Stagflation is a period when the price of consumer goods rises at the same time that the economy slows down. The potential impact on retirees' finances comes from stock market returns that could be flat or negative while the cost of their living expenses rises due to inflation. Fortunately, stagflation has been rare in the U.S. We last experienced stagflation in the late 1970s and early 1980s, attributed to oil price shocks and policy mistakes. At the time, Federal Reserve Chairman Paul Volcker significantly increased interest rates to tame inflation, which led to a recession with high unemployment in the early 1980s. However, these events also helped set the stage for economic growth later in the 1980s with reduced inflation. Stagflation can negatively impact both sides of the common-sense formula for retirement security: If you depend on stock market investments to generate regular systematic withdrawals to cover your living expenses, you could see your retirement income drop. To add to the pain, your living expenses are likely to have increased. Pre-retirees and retirees can prepare for stagflation by adopting strategies that improve both sides of the common-sense formula for retirement security described above. Here are some ideas for protecting your retirement income: Here are some ideas for managing your living expenses: Periods of stagflation are generally a bad time to retire, since your finances are under pressure and there's a lot of uncertainty. Retiring when your stock market investments have dropped and withdrawing too much from those savings can permanently depress your retirement investments. However, as evidenced by our experience in the 1970s and 1980s, it might take several years for our economy to overcome a period of stagflation. Given that, you might not want to wait that long to retire or you may be forced to retire if your employer is under stress. In this case, you might want to consider semi-retirement as a strategy to allow your Social Security benefits to grow and to delay tapping into your retirement savings. We also need to encourage our political leaders to manage the federal debt more responsibly and allow the Federal Reserve to adopt the appropriate policy moves. Today's pre-retirees and retirees lived through the stagflation of the 1970s and 1980s. It might have been painful, but we survived by being resilient and making smart choices. We can do it again!
Yahoo
7 days ago
- Business
- Yahoo
Bank of America Bullish on Goldman Sachs, Predicts Surge to $700
The Goldman Sachs Group, Inc. (NYSE:GS) is one of the best stocks for a retirement stock portfolio. On June 12, Bank of America reaffirmed its Buy rating on Goldman Sachs, highlighting the firm's ability to evolve with changing conditions, describing it as having 'proven DNA to adapt to an ever-changing world.' A close-up of a financial advisor giving advice to a customer, demonstrating the importance of consumer and wealth management. The bank set a price target of $700 per share, suggesting a 12% gain from June 11's closing price of $624.17. Analyst Ebrahim Poonawala noted The Goldman Sachs Group, Inc. (NYSE:GS)'s long track record of weathering challenging periods, pointing to the Paul Volcker era at the Federal Reserve and the 2008 financial crisis as moments that showcased 'a strong combination of scale and flexibility.' Poonawala made the following comment: 'A sea change in the macro backdrop (interest rates, geopolitics) vs. post-GFC [Great Financial Crisis] years combined with a strategy that is focused on deepening client relationships (via financing) has increased the resiliency of trading revenues.' He also projected ongoing strength in The Goldman Sachs Group, Inc. (NYSE:GS)'s trading revenue, which stood out in the bank's latest quarterly results. The analyst further stated: 'Goldman's presence in the private credit space dating back to the mid-90s, history of strong risk management (superior client selection) should reduce the risk from any potential credit volatility in this space.' GS has surged by nearly 7% since the start of 2025. While we acknowledge the potential of GS as an investment, we believe certain AI stocks offer greater upside potential and carry less downside risk. If you're looking for an extremely undervalued AI stock that also stands to benefit significantly from Trump-era tariffs and the onshoring trend, see our free report on the best short-term AI stock. READ NEXT: and Disclosure. None. Sign in to access your portfolio
Yahoo
7 days ago
- Business
- Yahoo
Bank of America Bullish on Goldman Sachs, Predicts Surge to $700
The Goldman Sachs Group, Inc. (NYSE:GS) is one of the best stocks for a retirement stock portfolio. On June 12, Bank of America reaffirmed its Buy rating on Goldman Sachs, highlighting the firm's ability to evolve with changing conditions, describing it as having 'proven DNA to adapt to an ever-changing world.' A close-up of a financial advisor giving advice to a customer, demonstrating the importance of consumer and wealth management. The bank set a price target of $700 per share, suggesting a 12% gain from June 11's closing price of $624.17. Analyst Ebrahim Poonawala noted The Goldman Sachs Group, Inc. (NYSE:GS)'s long track record of weathering challenging periods, pointing to the Paul Volcker era at the Federal Reserve and the 2008 financial crisis as moments that showcased 'a strong combination of scale and flexibility.' Poonawala made the following comment: 'A sea change in the macro backdrop (interest rates, geopolitics) vs. post-GFC [Great Financial Crisis] years combined with a strategy that is focused on deepening client relationships (via financing) has increased the resiliency of trading revenues.' He also projected ongoing strength in The Goldman Sachs Group, Inc. (NYSE:GS)'s trading revenue, which stood out in the bank's latest quarterly results. The analyst further stated: 'Goldman's presence in the private credit space dating back to the mid-90s, history of strong risk management (superior client selection) should reduce the risk from any potential credit volatility in this space.' GS has surged by nearly 7% since the start of 2025. While we acknowledge the potential of GS as an investment, we believe certain AI stocks offer greater upside potential and carry less downside risk. If you're looking for an extremely undervalued AI stock that also stands to benefit significantly from Trump-era tariffs and the onshoring trend, see our free report on the best short-term AI stock. READ NEXT: and Disclosure. None. Error in retrieving data Sign in to access your portfolio Error in retrieving data Error in retrieving data Error in retrieving data Error in retrieving data
The Hill
07-06-2025
- Business
- The Hill
A bond market meltdown might be inevitable
The recent surge in yields on long-dated U.S. Treasurys has generated concern in some circles. Jamie Dimon, the CEO of JPMorgan Chase, recently warned that the bond market is likely to crack as a result of spiraling government debt levels. 'I just don't know if it's going to be a crisis in six months or six years, and I'm hoping that we change both the trajectory of the debt and the ability of market makers to make markets,' he said. Others remain more sanguine and observe that interest rates have in fact normalized close to their pre-2008 global financial crisis levels. In the aftermath of the financial crisis, both real and nominal rates were stuck at unusually low levels for about a dozen years. But, since 2022, we have seen both policy and market rates edge toward their pre-crisis levels. With interest rates reverting back to their historical norms, is the current wariness surrounding the long end of the yield curve among key investors warranted? To evaluate the validity of such fears, it is worth reviewing recent U.S. fiscal history. During the past 45 years, the U.S. has had to deal periodically with the 'twin deficits' problem — the near-synchronous widening of the fiscal deficit and the current account deficit. In the past, bipartisan policy compromises pushed through by enlightened political leadership have helped America avoid a debt/currency crisis. In the early 1980s, the Reagan-era tax cuts contributed to a decline in U.S. government revenue that was not offset by cuts on the spending side and this led to a widening of the budget deficit. Meanwhile, the high interest rates associated with the Paul Volcker disinflation episode led to a sharp appreciation of the U.S. dollar and contributed to a deterioration of the trade and current account balances. This simultaneous deterioration of budget and current account balances gave rise to the twin-deficit hypothesis and highlighted the potential interconnectedness between fiscal deficits and trade deficits. Emergence of 'twin deficits' during the early 1980s generated significant concern in policymaking circles and led to concrete measures on both the fiscal front (in the form of the Tax Reform Act of 1986 and the Budget Enforcement Act of 1990) and on the exchange rate stabilization front (in the form of multilateral agreements such as the 1985 Plaza Accord and the 1987 Louvre Accord). In the Clinton era, further steps (such as the 1993 Omnibus Budget Reconciliation Act, the reduction in military spending associated with the post-Cold War peace dividend and the 1996 Personal Responsibility and Work Opportunity Reconciliation Act) were undertaken to improve the U.S. fiscal outlook. During the fiscal 1998 through fiscal 2001 period, the federal government even ran budget surpluses. Concerns regarding the 'twin deficits' reemerged during the George W. Bush era as fiscal and current account imbalances worsened. Prior to the 2008 global financial crisis, economists worried that the spike in budget and trade deficits was serious enough to threaten a dollar crisis. Following the collapse of Lehman Brothers in September 2008, however, there was a dollar shortage abroad and the U.S. currency actually strengthened. Furthermore, as household consumption collapsed and personal saving rate rose, the U.S. current account markedly improved in the post- global financial crisis era. During the Obama era, the 2011 Budget Control Act and the artificially suppressed borrowing costs (via Fed's quantitative easing and near-zero interest rate policies) helped ease the fiscal burden. Over the past five years, both the budget and trade deficits have deteriorated sharply. Budget deficits have exceeded 5 percent of GDP since 2020 and projections indicate deficits will remain elevated, raising concerns about fiscal sustainability. Critically, government borrowing costs have risen sharply since 2022. Historian Niall Ferguson has suggested that America's superpower status may be threatened as the U.S. government now spends more on interest payments than on defense. Unlike prior episodes, the current cycle of deteriorating external and fiscal imbalances is significantly more worrisome as the country appears to be beset by institutional decay and political ineptitude. Domestic and foreign investors in U.S. Treasurys are starting to fret about the absence of fiscal rectitude even as government debt-to-GDP ratios reach levels last observed in 1946. Additionally, illogical and inconsistent policies on the trade and foreign policy front raise the prospect of a so-called 'moron premium' being applied to U.S. assets. Legislative threats to tax foreign capital is raising alarm and will likely push up the cost of borrowing even further. Such actions are also fueling concerns about the pre-eminent reserve currency status of the U.S. dollar. Any diminishment of dollar's exorbitant privilege will affect U.S. fiscal sustainability. Unlike the 1990s, there is currently no political consensus on reining in fiscal profligacy and restoring fiscal sanity. Harvard's Ken Rogoff recently noted: 'To be sure, this isn't just about Trump. Interest rates were already rising sharply during Biden's term. Had Democrats won the presidency and both houses of Congress in 2024, America's fiscal outlook would probably have been just as bleak. Until a crisis hits, there is little political will to act, and any leader who attempts to pursue fiscal consolidation runs the risk of being voted out of office.' The late great MIT economist Rudiger Dornbusch once quipped: 'In economics, things take longer to happen than you think they will, and then they happen faster than you thought they could.' Recent spikes in bond market volatility and long-dated Treasury yields suggest that the moment of fiscal reckoning may finally be approaching. Vivekanand Jayakumar, Ph.D., is an associate professor of economics at the University of Tampa.
Yahoo
14-05-2025
- Business
- Yahoo
Goldman Sachs announces major change to S&P 500 forecast
The S&P 500 is the benchmark index most investors use to measure performance, and for good reason. It comprises 500 of the largest companies in America, crisscrossing industries. The index represents the U.S. economy's strength or weakness. It's a leading indicator because market participants make buy-and-sell decisions, anticipating what may happen next. Earlier this year, those participants grew very anxious. Weakening jobs data and sticky inflation already had investors jittery about stagflation. President Trump's harsher-than-expected tariffs put an outright recession on the have changed recently, though. Trump's Liberation Day tariff announcement sent stocks reeling to new lows, prompting him to reverse course on April 9, when he paused implementing many of his tariffs for 90 days to negotiate trade deals. The S&P 500, which had become oversold, has marched in a straight line higher since then, bullied up by hopes that negotiations would rein in the worst of the tariffs, including the sky-high 145% tariff on Chinese goods. The S&P 500 has gained over 13% since its April lows, and following Trump's reduction of China tariffs to about 30% on May 12, Goldman Sachs has reset its S&P 500 forecast. The Federal Reserve finds itself backed into a corner this year. After engaging in the most restrictively hawkish monetary policy since Chair Paul Volcker battled inflation in the 1980s, current Chairman Jerome Powell was forced to about-face and cut rates three times in 2024 to shore up a weakening jobs market. The dovish shift by the Fed late last year shaved 1% off the Fed Funds Rate, but the Fed had to abort more cuts when inflation ticked higher and amid Trump's imposing inflationary Trump instituted 25% tariffs on Mexico and Canada in February. On April 2, he unleashed a torrent of reciprocal tariffs, kicking off a trade war with China that lifted Chinese tariffs to 145%. He also instituted 25% tariffs on autos, sending shockwaves throughout the industry, which relies heavily on imported cars, trucks, and auto parts. The threat of higher prices because of new import taxes has left the Fed in a big bind. Its dual mandate is low inflation and unemployment, two often competing goals. Cutting rates this year risks adding more fuel to inflation's fire, but it would help jobs. Raising rates would pressure a jobs market already in trouble if inflation skyrockets because of tariffs. Last month, the unemployment rate was 4.2%, up from 3.4% in 2023. According to the monthly Job Openings and Labor Turnover Survey (JOLTS), there were also over 900,000 fewer unfilled jobs last month. Companies have announced 602,493 layoffs this year, up 87% year over year, partly due to Department of Government Efficiency job cuts. That's not great. And the economy reflects it. In Q1, Gross Domestic Product (GDP) contracted 0.3%. With that backdrop, it's little wonder that investors got antsy. The S&P 500 fell 19% from its all-time high in February to its low on April 8, just missing bear market territory. The stock market's swoon since February was arguably a self-inflicted wound, given that most losses came after Trump's tariff announcements. The Trump administration, however, has always seemed to pay attention to the markets, and this time appears no different. More Experts Treasury Secretary delivers optimistic message on trade war progress Shark Tank's O'Leary sends strong message on economy Buffett's Berkshire has crucial advice for first-time homebuyers The stock market's retreat, plus sell-offs in the U.S. Dollar and Treasury bonds, likely contributed to Trump's quick pivot on tariff policy on April 9. Most reciprocal tariffs were paused except China's, shifting markets from worrying over the next tariff drop to becoming flat-footed amid what may prove to be a steady slate of positive trade deal news. That shift hasn't been lost on Goldman Sachs, one of the most prominent Wall Street research firms. Like most, Goldman Sachs ratcheted its S&P 500 outlook lower on recession risk amid the tariffs-driven sell-off. Now, it's ratcheting its forecast higher again. On May 12, Trump announced that weekend negotiations between the U.S. and China were fruitful enough to roll back tariffs to 30%, comprising a 20% fentanyl tariff instituted in February and a 10% baseline tariff that brings China in line with the rest of the world. The news took an economic Armageddon potentially off the table, allowing Goldman Sachs to ramp up its S&P 500 outlook due to higher revenue and profit potential. "While we had expected a de-escalation, the rate is lower than the +54pp tariff hike we had penciled into our baseline," wrote Goldman Sachs analysts in a note to clients. "We raise our S&P 500 return and earnings forecasts to incorporate lower tariff rates, better economic growth, and less recession risk than we previously expected." Goldman Sachs expects S&P 500 companies to deliver earnings per share of $262 in 2025, up 7% year over year, and $280 in 2026, also up 7%. "These estimates reflect better-than-expected 1Q 2025 results and a stronger U.S. economic growth outlook in coming quarters," wrote Goldman Sachs. "Our previous EPS growth estimates were +3% and +6%, respectively." Additionally, Goldman Sachs increased its forward price-to-earnings outlook for the S&P 500 to 20.4 from 19.5. "Our updated fair value estimate reflects reduced uncertainty, faster earnings growth, lower inflation, and renewed confidence in the fundamentals for the largest stocks in the index," wrote Goldman Sachs. Overall, Goldman Sachs has reset its S&P 500 price targets to 5,900 for the next three months and 6,500 in 12 months, up from 5,700 and 6,200, respectively. Its six-month target is 6,100, up about 4% from here, and above its prior 5,900 in retrieving data Sign in to access your portfolio Error in retrieving data Error in retrieving data Error in retrieving data Error in retrieving data
