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Current Events Rattle Financial Markets

A look at two key issues impacting the markets, plus some ways to stay focused on your financial future.

By Stephen Rich

Stock market volatility is created by uncertainty. This is a normal occurrence in the life-cycle of investing, even though when it is happening, it can be very unsettling to the investor. While the causes of market volatility are almost always different, they share similarities in that there are typically sharp downward moves that can occur quickly and are generally unexpected. At the moment, we have two sources of uncertainty—the path and change frequency of the Federal Reserve's interest rate policy, and the geopolitical crisis caused by the invasion of Ukraine by Russia.

Federal Reserve Raising Interest Rates?

In 2022, the Federal Reserve ("Fed") signaled an intent to raise interest rates and reduce its balance sheet to slow economic growth and rising inflation, a reversal from 2020, when the Fed lowered interest rates to support the economy during the Covid-19 pandemic. Rising interest rates are not necessarily "bad," because they typically indicate a strong economy, but investors must assess how higher interest rates and a less accommodative Fed will affect the economy and, ultimately, company earnings and valuations.

Crisis in Ukraine Wreaks Havoc

At the same time, there is a geopolitical crisis in Ukraine. While we are less than a week into the conflict, we have already seen energy prices rise, which hurts consumers, increases costs for many businesses and puts upward pressure on inflation. Higher prices are being felt particularly in Europe, as it is estimated that 40% of Europe's gas supply comes from Russia. Depending on the duration of the conflict, we could see a drag on the world Gross Domestic Product as higher energy prices work their way through the global economy. This complicates the picture for the Fed, which was already tasked with removing an unprecedented amount of monetary policy accommodation without tipping the economy into recession.

Take Care of Your Portfolio

It is impossible to predict market events that may occur in any given year, and studies show that market timing does not work, especially since, historically, large gains tend to follow large losses. How should an investor, especially a participant in a retirement plan, think about their portfolio? And what actions, if any, should they take?

  1. Maintain A Long-Term Investment Strategy
    First, have a long-term investment strategy that aligns with your risk tolerance and time horizon. Asset allocation is the key driver of your potential long-term investment return and the potential volatility of your investment portfolio. Your investment time horizon can also play an important factor in reducing the impact of volatility on your portfolio. Time is a powerful ally of retirement investors, because the potential impact of volatility on a portfolio narrows as you extend the investment holding period.
  2. Keep A Diversified Portfolio
    Second, manage volatility with a diversified portfolio. Target-date funds and asset allocation funds generally provide participants with an all-in-one fund approach that is diversified among asset classes and investment styles.* If you construct your own portfolio, consider balancing investments between different asset classes and investment styles, and don't concentrate the portfolio in one particular fund or style. Note, however, that diversification does not guarantee investment returns or eliminate the risk of loss.
  3. Continue to Save for Retirement
    Third, continue to contribute to your retirement plan through regular deductions. By maintaining consistent contributions to your retirement portfolio, you are dollar-cost averaging, which ensures that you buy more when share prices dip and less when prices are high.
  4. Don't Make Rash Decisions
    Lastly, avoid the temptation to focus on short-term market trends and to make rash decisions. Market timing can be costly. Staying invested and riding out the market decline typically leads to better outcomes. 2020 was a great example. Many investors who exercised patience by not selling at the market low in March were able to participate in the significant upside throughout the rest of the year and throughout 2021.

We believe that the current uncertainty in the stock market will run its course, and making significant changes to your investment strategy based on short-term trends can be counterproductive to achieving your long-term retirement goals.


*The value of a target date fund is not guaranteed at any time, including at and after the target date. There is no guarantee that a target date fund will correctly predict market or economic conditions, and as with other mutual fund investments, you could lose money. In addition to a target retirement date, individuals should consider their risk tolerance, time horizon, personal circumstances and complete financial situation before investing.


Stephen Rich is the Chairman and CEO of Mutual of America Capital Management LLC.

The views expressed in this article are subject to change at any time based on market and other conditions and should not be construed as a recommendation. This article contains forward-looking statements, which speak only as of the date they were made and involve risks and uncertainties that could cause actual results to differ materially from those expressed herein. Readers are cautioned not to rely on our forward-looking statements. This content is for informational purposes only and not intended to be investment advice.

Mutual of America Capital Management LLC is an indirect, wholly owned subsidiary of Mutual of America Life Insurance Company. Securities offered by Mutual of America Securities LLC, Member FINRA/SIPC. Insurance products are issued by Mutual of America Life Insurance Company.

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