With Recovery Comes Many Questions

North American markets today, Wednesday, viewed several hours before the 9:30 a.m. EST opening, appear poised to start strong with all major indicators firmly in the green. That follows yesterday’s tech sell-off as Facebook dropped $4.22 to close at $318.36, Apple Inc. dropped $4.69 to close at $127.85 and Alphabet Inc. lost $40.92 to close at $2354.25. The ever-volatile TESLA slipped $11.30 to close at $673.60

The Canadian markets closed with the TSX 60 finishing positive while the TSX Composite and TSX Venture finished in the red.

The safe havens of gold and silver are mixed at time of writing with gold up and silver down.

Currencies are also mixed with the Canadian dollar and British pound sterling up and Euro down. The British pound is getting some stability from the perception that support is decreasing for the Scottish National Party, according to Jeremy Thomson-Cook, Chief Economist at payments specialist Equals Money. Meanwhile the American greenback may have some sharp movements ahead. “Initially the dollar strengthened yesterday off a headline that Chinese fighter jets encroached on the airspace of Taiwan,” Thomson-Cook says. “We expect more of these throughout the Biden presidency and amid China’s need to show the world how strong it is following the pandemic.”

The European markets are open at time of writing and the major indices including the FTSE 100, DAX and CAC 40 in positive territory.

We have recently seen ‘the green shoots of spring for the Eurozone’ in the opinion of one trading analyst. “Despite confirmation of a technical recession, Eurozone growth and unemployment numbers are better than the market had feared,” says Robert Berkeley at London-based liquidity provider IX Prime.

“The Eurozone may be considerably behind the likes of the United States and United Kingdom in its 2021 economic recovery, but this data shows that winter is finally beginning to wane.

In fact, economic recovery is in different shape in different economies but irrespective of locale, some retirement planning decisions may have to be made or at least considered.

These combine a combination of expert financial advice and some personal introspection.

The glide path – the runway between work and impending retirement may need some re-calibration. Those who had projected healthy pension plan payments in future may need to do some re-thinking if a firing means that plans are truncated. It may also mean that medical and insurance benefits plans have to be re-jigged sooner rather than later.

Those who had to dip into retirement savings after being suddenly fired will have to replace the drawdowns or scale back their plans.

Those who find themselves suddenly members of the gig economy will have to consider whether to work longer than they had originally planned.

Conversely, some of those joining the gig economy may want to work longer since they are freed of the daily commute. That could free up more dollars for investment.

On the other hand, accepting early retirement could mean a scaling back of plans.

Moreover, the sudden and brutal effect of the pandemic has highlighted the need for individuals and couples to have a larger ‘emergency fund’ to be kept separate so that other assets don’t have to be liquidated at the wrong time. Emergencies don’t start and stop on a schedule and these funds should be substantial since the pandemic has taught us to expect the unexpected.

At the same time, some individuals have more money than they otherwise would have had, due to restrictions and closings. For some, the recovery could lead to what is sometimes called ‘revenge spending’ or the urge to make bigger ticket expenditures – and more of them -- than otherwise would have been the case.  Meanwhile due to the massive rally of some stocks, some investment portfolios will be larger than could have been anticipated before the days of so-called ‘easy money’ perhaps actually improving the retirement picture and making some portfolio re-balancing appropriate.

And the near future has got a bit cloudier yesterday. We had believed that the days of rock bottom interest rates would continue but Treasury Secretary Janet Yellen’s remarks in an interview with The Atlantic released yesterday suggested that the economy could be at risk of overheating if President Joe Biden’s spending proposals are approved. She raised the prospect of future interest rate increases, which appeared to contribute to yesterday’s share price drops. After her remarks shook the markets, she ‘clarified’ her position saying that she was not predicting or recommending interest rate hikes.

Yellen’s credentials for such musings are unassailable and everything she says has to be taken into account. Some part of this morning’s market optimism can probably be ascribed to her ‘clarification’

The other core point here is that one remark from an important Washington official can shake the markets.

One strategy will bring these questions into clear focus: requesting the financial advisor to calculate – on an ‘as things stand right ow’ basis how much can be drawn each month from all savings and retirement plans after taxes and assuming conservative growth. Having that figure calculated clearly will help focus on what can and can’t be done in retirement and the urgency –or lack of it—for bringing in additional income

As we all look over the horizon, we have a lot of financial issues to consider.

Disclosure: I do not own any shares in any companies mentioned in this article.

Related: A Big Week for Those with Pandemic-Related Holdings