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Here’s what financial advisers are saying about the latest Fed rate hike

The Marriner S. Eccles Federal Reserve Board Building in Washington, DC

Sarah Silbiger | Reuters

Although the market movements are positive for investors, they still face a complicated backdrop that should continue to weigh on asset prices going forward. Earlier in the week, the S&P 500 fell into bearish territory, meaning a 20% decline from its most recent high.

And, while the Fed is struggling to fight inflation, there is still plenty of economic uncertainty ahead. This can cause a lot of stress for investors, even those with long-term horizons.

“We’re certainly not immune to this,” said Certified Financial Planner Brad Klontz, author of “Mind Over Money” and co-founder of the Financial Psychology Institute. He was speaking at the CNBC Financial Advisor Summit.

Manage investment stress

Instead of getting stuck worrying about recent market moves, Klontz suggests looking at performance over a much longer time frame to help ease the nerves.

“When we become emotionally charged, we become rational,” Klontz said, adding that when that happens, people make mistakes that can cost them money. “You have to be able to calm down by expanding this frame of reference to see more clearly.”

Dan Egan, vice president of behavioral finance and investing at Betterment, agrees, noting that keeping an eye on future goals can also help investors deal with stress in volatile markets.

“This focus on the future is very powerful,” he said at the summit.

Certainly, while the Fed’s actions are important, financial advisers and investors shouldn’t be making decisions with their money solely around the central bank, summit attendee Douglas Boneparth, CFP and chairman of Bone Fide Wealth told New York.

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“If you’re building financial plans strictly around what the Fed says, I’m not sure you’re building solid financial plans,” he said, adding that financial advisers need to make sure their clients understand the whole situation.

“It’s always about helping people understand what they can’t control versus what they can,” he said.

Still, if you see your portfolio shrinking and it’s keeping you awake at night, it might be time to rebalance your portfolio, according to Stacy Francis, CFP, president and CEO of Francis Financial in New York, and also a participant in the summit.

“We need to put on a new pair of glasses and look at this portfolio and make sure the risk in it is appropriate,” she said.

Day by day

It is also important to manage investments taking into account the impact of inflation on daily expenses.

“While interest rates are needed to cool the economy and bring down inflation, this 75 basis point increase and still expected in the future means debt is more expensive,” Francis said.

This means people may also struggle to get loans for larger expenses, such as homes, cars, and education, while seeing higher prices for everyday items such as gasoline. and the food.

Hopefully people have taken preemptive steps to pay down their debt and adjust their cash flow to the current environment, CFP Lazetta Rainey Braxton said.

Braxton is Co-CEO and Senior Financial Planner at 2050 Wealth Partners in Brooklyn, New York.

If they don’t, they will have to accept what is happening now and compromise, she said. This includes the ability to reduce the lifestyle creep that might have happened when times were better, potentially asking for a raise at work or even considering moving in with the family or downsizing to combat the rise in housing prices.

“There is going to be some consolidation that happens with families,” she said. “Some are in survival mode; unfortunately, they are.”

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Disclosure: NBCUniversal and Comcast Ventures are investors in tassels.

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