If you’re getting close to retirement, you may be wondering how much risk is actually sitting in your portfolio right now, and whether it’s more than you realize. In this episode, we talked through several forces that could be working beneath the surface of the market: concentration risk, leverage, private credit, oil supply, and the national debt.
One thing we discussed is how concentrated the market has become in a small number of stocks, and how that concentration can encourage investors to take on leverage to chase more exposure to those names. Leverage can work well when prices rise, but it can also accelerate losses when they fall, since lenders may issue margin calls that force investors to sell,
sometimes indiscriminately, through ETFs and mutual funds. That kind of selling can ripple across the broader market and affect people who never used leverage themselves.
We also unpacked private credit, a category that’s been in the headlines lately. Because private credit isn’t required to disclose much, problems there may not surface until they’ve already become serious. When funds restrict redemptions, investors may turn to other assets, like ETFs, to raise cash, which can create pressure elsewhere in the market.
On the oil side, ongoing geopolitical tension has kept prices elevated, but increased US production and global demand shifts could eventually bring prices down. And on the national debt, we discussed how refinancing at higher rates, along with the long-term outlook for Social Security, could affect household budgets for years to come.
None of this is meant to be alarming for its own sake. It’s meant to help you understand what may be happening around you so you can plan accordingly. If you have questions about how any of this applies to your retirement plan, our team is here to help.
Key Takeaways
– Market concentration in a small number of stocks may be encouraging investors to take on leverage, which can accelerate losses if prices fall.
– Margin calls can force indiscriminate selling through ETFs and mutual funds, which may affect the broader market even for investors who don’t use leverage.
– Private credit isn’t required to disclose much information, so problems in that space may not become visible until they’ve already reached a crisis point.
– Oil prices may stay elevated in the near term due to geopolitical tension, but increased production and demand shifts could bring prices down over time.
– The national debt and rising refinancing costs may put pressure on the federal budget, and current law suggests Social Security benefits could be reduced by 2036 if nothing changes.
– Active, tactical portfolio management may help you respond to downside risk rather than relying solely on a buy-and-hold approach.
Fitzwilliams Wealth Management, Inc. is an SEC registered investment advisor. FWM and Fitzwilliams Financial are affiliated companies. This content is for informational purposes only and should not be construed as personalized investment advice. We do not provide tax or legal advice. Media appearances are for informational purposes only and do not constitute an endorsement. Investing involves risk.