China’s Covid Protests Rattle Markets
Retirement funds are taking yet another blow from Covid. Pandemic inspired inflation and rising interest rates are already driving down fund values. Now global markets are falling after protests erupt in China over their strict Covid lockdowns. The demonstrations are the largest show of discontent since the Tiananmen Square protests in 1989. China is the world’s second largest economy and the most populous nation. There are huge global political and economic consequences on the line if protests escalate.
Stock markets around the world, including the United States, are dropping. The Dow Jones Industrial Average fell 192.36 points. The S&P 500 lost 30.51 points. And the Nasdaq Composite dropped 90.21 points. US Treasuries yields fell, and the Dollar dropped as well.1
The Chinese yuan fell against the dollar. “Investors are running ice cold on China,” said Stephen Innes, managing partner of SPI Asset Management. He added that the currency might be “the simplest barometer” to gauge what domestic and overseas investors think.2
China’s strict zero Covid policy is locking down cities. Manufacturing and distribution are slamming to a halt. Continued lockdowns are stalling economic growth and increasing unemployment. China is under pressure to scrap its zero Covid policy. But if they do, they risk the disease spreading further and causing more long-term damage.
Pandemic’s Effect on Retirement
The Chinese protests are only the latest disruption to the value of retirement funds by Covid. One in five Americans say they are saving less money for retirement due to the pandemic.
The pandemic has been devastating to employee retirement plans. The pain is obviously worst for those who lost jobs and their plans. Those with reduced pay and hours had the amount they could contribute limited. In the worst-case scenarios, some people tapped into their retirement savings. A survey by Betterment showed that more than half of respondents thought they will need to dip into their retirement savings with a year. While another survey found that 36% of Americans expect Covid 19 to delay their retirement.3
The Federal government tried to offer some relief with the Coronavirus Aid Relief and Economic Security (CARES) Act. The law makes it easier for people to tap into the money in their retirement accounts by removing several penalties. The Act also makes it easier to take retirement plan loans. The problem is that even though the money is easier to access, it is still hard to pay back. And now people are finding themselves on the hook after the penalty free period expires. A steep market decline combined with excessive retirement account withdrawals can leave retirees with a smaller pool of assets. They are unlikely to grow sufficiently to recoup market losses, even when the market recovers.
Amid the damage caused by the pandemic, gold has been holding steady. As the Chinese protests send securities and other commodities reeling, the price of gold has been stable due to safe haven demand. Some analysts forecast the price to increase as people are reluctant to sell in this chaotic market. The effects of the pandemic have been lingering for years now. With no end to the geopolitical turmoil in sight, a Gold IRA is one of the best ways to protect your retirement funds. Contact us today to learn more.