The United States stock market has hit some record-high numbers during the past couple of years. Yet, why are the earnings on your retirement investments flat? After you factor in administration fees, your nest egg might actually be losing a little money. You might wonder how that can happen when the stock market is still high. The quick answer is trade wars. You need to know how trade wars hurt your retirement investments.
Many retirement accounts invest primarily in stock index funds. The current administration has engaged in tariff wars all over the world. The result is that stock index funds have experienced almost no growth during this time. Just when you need to be growing your retirement account to be ready to retire, your hard-earned retirement account might be barely treading water.
The president claims the S&P 500 index has reached records, but the actual numbers paint a different picture. During the last two years, the S&P 500 index had an annual growth rate of 2.9 percent, which barely keeps up with the pace of inflation during that period.
There were initial gains in the S&P index shortly after the election, but those gains slowed, and now the index is basically flat. Taking the entire period since the 2016 election, the S&P 500 has increased at the same rate that it did from 2008 through 2016, even with the Great Recession.
Economists say the trade wars with so many other countries have created significant damage to the economy, but people do not realize it because they are not reading their 401(k) statements. Some experts say the trade wars hurt not only the S&P markets in the United States but the entire world market. When a trade war slows the US economy, it also drags down the markets in other countries that rely on a strong US market.
How to Protect Your 401(k)
This article does not give investment advice. You should speak with a trusted financial advisor before making a decision about how to protect your life savings. In addition to getting professional investment advice, there are some things every investor should do.
Become and remain well-read on matters that affect the economy. Get your information from unbiased sources that do not have political affiliations. Learn what factors affect the economy and how current events can impact your 401(k) investments.
Pull out or download your most recent 401(k) statement. Then get statements from one, two, five and ten years ago. Compare the annual growth rate of your investments. The total value of your account should increase from one year to the next because you and your employer make regular contributions to the account. The total value can increase, even if the investments are not growing or earning because of your payroll deduction contributions and your employer’s matching contributions.
You need to determine, aside from those contributions, how much your 401(k) is growing. Your plan administrator should be able to answer that question for you. If you are not pleased with the rate of growth of your 401(k), you might want to evaluate whether reallocating some of your 401(k) investments would be a sound financial choice.
HuffPost “The Stock Market in Trump’s Head Is Doing Much Better Than The One In Real Life.” (accessed December 12, 2019) https://www.huffpost.com/entry/trump-trade-401ks-stock-market_n_5db750dee4b05df62ec3e9cc