Page 8 - Inflation -The Killer of Your Retirement Savings

On the other hand, if the Fed is successful in bringing down inflation but has to trigger a Volcker-style recession in order to do it, you could be in for a rough couple of years. Volcker sent the economy into recession at a time when the country had already endured the stagflation of the 1970s, and unemployment soared into double digits.16
As the Volcker recession ended, markets rebounded and the country experienced a phenomenal bull market that hasn’t been seen since.17 If Powell channels his inner Volcker, you would have to hope that the economy exits the recession on the other side and returns to growth. If not, any losses you suffer could take years to recover from.
3. Economic Headwinds
It seems as though we’re facing a perfect storm of economic headwinds
that are coming together at just the right time to create the potential for a financial crisis that could make 2008 look like nothing. Loose monetary policy and excessive government spending for over a decade could result in the next recession being far worse than many people today expect.
Unlike 2008, we’re faced with the prospect of high inflation. And with a central bank that has pledged not to ease any further, we can’t bank on quantitative easing to get us out of this mess.
Then you have continued supply chain issues, with shipping, rail transport, and trucking all facing their fair share of hurdles. Consumer spending is weakening, as high debt levels are weighing on households whose ability to spend is constrained on one hand by debt and on the other by inflation.
The labor market has been completely upended since 2020, and no one knows when it might return to normal, as work from home and demands for higher wages have revolutionized the nature of jobs in this country. To say that we’re facing an unprecedented confluence of events isn’t overstating things at all.
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