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High inflation, declining stocks and bonds cause trouble for worker pensions - YouTube
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it is the closing bell at the new york
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stock exchange u.s stocks tried bouncing
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back after the bureau of labor
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statistics latest consumer price index
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revealed inflation slowed for the first
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time since august however the rebound
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was short-lived the dow jones ended the
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day in the red down more than 300 points
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yeah the s p and nasdaq also had an up
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and down day the s p closed down more
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than one and a half percent the nasdaq
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ended down more than three percent
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joining us now for more on all of this
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is michael rosen he is the managing
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partner and chief investment officer of
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angelus investments michael welcome
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great to have you with us so
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what drove the markets down today and
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how are the april consumer price numbers
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impacting investor strategies
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well thanks it's nice to be with you um
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the inflation numbers were a
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disappointment today uh inflation was a
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lot higher than the market expected
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and this led to concerns that the fed is
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going to have to tighten a lot more
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aggressively than they've planned and
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that the market anticipates and this
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also increases the risk of a recession
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uh in the near future as well and so
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we see stocks falling a bit uh today the
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yield curve flattened a little bit as
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well
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again expressing maybe some concerns of
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rising risks of recession and that the
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fed really is going to have to be a lot
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more aggressive than they
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have said they're going to be michael
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how has inflation coupled with losses in
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the stock and bonds markets impacted the
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pensions of american workers
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right so for public pension funds and
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corporate pension funds that have
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defined benefit plans
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uh
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the uh if inflation has had sort of a
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mixed impact at least in the short term
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uh the value of their stocks and bonds
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have fallen
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that's bad
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on the other hand interest rates have
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risen
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which serves to reduce the value of
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liabilities and so the funded status for
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most pension funds
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actually may have improved a little bit
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with the rise in interest rates but the
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real issue with inflation is it's just
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going to be very hard for
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pension beneficiaries and really
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investors everywhere
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to keep pace with inflation
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by owning just traditional stocks and
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and bonds uh uh valuations are still
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relatively high uh we're seeing uh
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prices fall and uh and negative returns
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but even if we had you know positive
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returns these returns on and after
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inflation
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basis are not very attractive and so
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investors are having a really hard time
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uh keeping pace with the cost of living
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particularly over the long term and and
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even more so as inflation just continues
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so the faster the fed gets its act
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together and tightens monetary policy uh
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the sooner we can see inflation starting
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to to come down but we're we're just not
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there yet and so michael kind of to
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follow up on some of your earlier points
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how would you suggest americans whose
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pensions and retirement funds have taken
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a hit recuperate some of those losses
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particularly if they are nearing
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retirement age
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well it's really tough i wish i had an
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easy answer uh something easy to do that
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would solve all the problems but
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unfortunately
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with inflation it's very very difficult
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to to overcome for investors i mean i no
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one's expecting inflation that we saw in
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double digits back in the 1970s but if
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you think back to that time
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investors in financial assets had a very
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very hard decade
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certainly bonds had negative returns on
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an inflation-adjusted basis and and even
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stocks struggle again uh after after
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inflation so
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uh there's no real easy fix for for
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what's happening until we get inflation
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under control i do think that the best
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thing investors can do is to maybe uh
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pull in the sails a little bit and
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and try to
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become a bit more defensive
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shorten the duration if you have long
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duration bonds
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move to shorter duration bonds and take
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advantage of the the rising interest
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rates
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on the stock side again also shortened
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duration by maybe favoring companies
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that have
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solid and perhaps growing dividends
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higher dividends helps to
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provide some protection in a in a down
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market as well
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uh but in the end inflation is just a
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very very tough thing to overcome for
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investors but i think getting a little
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bit more defensive maybe uh again
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shortening duration and fixed income and
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favoring higher dividend yielding stocks
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may may be one way to lessen some of the
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pain
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all right breaking it all down for us
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michael rosen thank you michael
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you bet thank you
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