4 key money movements in an uncertain economy, say advisers

We think investors still need to brace themselves due to high volatility, says Citi's Ida Liu

By most standards, the new year is off to a good start. However, economists and business leaders alike predict that tougher times lie ahead for the market and the economy.

Year to date, the S&P 500 and Dow Jones Industrial Average are up about 4% and more than 2%, respectively, while the Nasdaq Composite is up 5.9%.

However, inflation remains a persistent problem. The Consumer Price Index for December showed that prices decreased by 0.1% from the previous month, but were still 6.5% higher than a year ago.

“The easing of inflationary pressures is evident, but that doesn’t mean the Federal Reserve’s job is done,” said chief financial analyst Greg McBride. “There is still a long way to 2 percent inflation.”

Although the Fed’s fight against inflation is headed for success, it will come at the cost of a hard landing for the economy, according to a CNBC survey of CFOs. Economists have been predicting a recession for months, and most see it starting at the beginning of the year.

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To make the most of the current climate, advisors recommend several key money moves in the coming year.

Here are their top four strategies to hedge against stock market volatility, rising interest rates and geopolitical risk — not to mention fears of an impending recession.

1. Pay off high-interest debt

“This is a great time to pay off some of those higher-interest loans,” said David Peters, a financial advisor and certified public accountant at CFO Capital Management in Richmond, Va.

Credit card rates, in particular, now average more than 19%, an all-time high. Those annual percentage rates will also continue to rise as the Fed continues to raise its benchmark rate.

“We’ve been pretty spoiled in the markets for so long,” Peters said. In some cases, it made financial sense to use a low-cost loan for a larger purchase, rather than withdraw money from a savings or investment account. Now, “we need to reverse our way of thinking.”

Think about this: “If you have a loan with an interest rate of 100% and you pay the principal on the loan, that’s almost the same as getting a 100% return on your money in the markets,” he said.

If you currently have credit card debt, “grab one of the zero-percent or low-rate balance transfer offers,” McBride advised. Cards that offer 15, 18 and even 21 months interest-free on carried balances are still widely available, he said.

2. Put your money to work

Once you’ve paid off your debt, Peters recommends putting some money away in a special savings account for emergency expenses.

“Online savings accounts can be a way to make money during times when other investments may not be returning well,” he said.

However, while some of the best high-yield online savings accounts now pay over 3.6%, according to, even that won’t keep up with the rising cost of living.

Ted Jenkin, CEO of Atlanta-based Okigen Financial and a member of CNBC’s advisory board, recommends buying short-term, relatively risk-free Treasuries and bundling them to ensure you earn the best rates, a strategy that involves holding the bonds until they expire.

“It’s not a huge return, but you won’t lose your money,” he said.

Another option is to buy federal I bonds, which are inflation-protected and virtually risk-free.

And the bonds currently pay 6.89% annual interest on new purchases through April, up from the 9.62% annual rate offered from May to October 2022.

The downside is that you can’t redeem I bonds for a year, and you’ll pay interest for the last three months if you cash out five years ago.

3. Increase pension contributions

Once you’ve paid off high-interest credit card debt and set aside some money, “putting more into your retirement accounts now can be a great move,” Peters said.

You can put away $22,500 in your 401(k) for 2023, up from a limit of $20,500 in 2022. The new provisions in “Secure 2.0” will further expand access to the retirement plan and open up more opportunities to save in the future, Peters said. , including making it easier for employers to make contributions to 401(k) plans on behalf of employees paying off student debt.

Even if you balance contributions with short-term goals, you should still contribute enough to take full advantage of the company’s matches, he added, which is like getting an extra return on your investment.

4. Buy dip

“Investors willing to take on additional risk could consider ‘buying the dip’ by looking at sectors that have been particularly hard hit and may now be undervalued,” said CFP Brian Kuderna, founder of Kuderna Financial Team in Shrewsbury, NJ, and author of the forthcoming book, “What Should I Do With My Money?”

“Tech has taken it to the head, Amazon has lost half its market cap, if there’s been too much pullback, there might be an opportunity,” he said.

Kuderna recommends dollar cost averaging, which helps smooth out market price fluctuations. Investing at specific intervals over time can also help you avoid emotional investment decisions.

However, a long-term horizon is key to this type of approach, Kuderna added, which means you’re willing to leave that money alone.

“The overall advice I have is don’t follow the market too closely, that’s when people start to get emotional and that’s when mistakes happen.”

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