Federal Layoffs and Markets
“For all of its uncertainty, we cannot flee the future.”
Markets have recently experienced a pullback and increased volatility after reaching new highs. Let’s break down what is happening and why it matters to you.
This is primarily due to concerns about inflation, tariffs, and their potential impact on consumer sentiment and spending. Additionally, federal workforce reductions and layoffs have contributed to uncertainty about the economy's future.
The new administration is pushing for cost-cutting and streamlining measures within the federal workforce. Agencies may be required to submit layoff plans by March 13, 2025, amidst ongoing budget reductions, workforce restructuring, and modernization efforts.
While the long-term effects of these job cuts are unclear, they could have a ripple effect on other sectors if affected workers cannot find new jobs and households reduce spending.
Despite these uncertainties, there are reasons for cautious optimism. Q4 corporate earnings are showing promising results, and we could potentially see the largest year-over-year earnings increase since 2021.
Many companies are exceeding expectations with better-than-anticipated results, suggesting that business conditions are stronger than initially thought.
However, given the current high stock valuations, continued strong earnings are crucial for sustained market growth. If businesses underperform, we can anticipate a market pullback.
What does this mean for your investments?
Market pullbacks and volatility are a normal part of investing, particularly during uncertain times. Your portfolio was designed to withstand these fluctuations and keep you on track towards your goals.
When markets decline, it's natural to feel nervous and question your investment strategy. It's a common investor experience, but letting emotions dictate your investment decisions typically leads to poor outcomes. Abandoning your strategy during turbulent markets can lock in losses and cause you to miss out on future opportunities.
However, this doesn't mean rigidly adhering to a strategy that's no longer suitable. That’s why it’s important to diligently monitor the situation and use data and experience to help navigate the current landscape. While you or I can't predict the future, we can always adapt and adjust our strategy as needed.
Action Items
Whether you are a federal employee or not, I understand that the news of federal layoffs is unsettling. You are not alone in feeling this way, as change can be overwhelming. Please know that you have options and support available. As always, I want to help people navigate this transition with clarity and confidence so they can make informed decisions for themselves and their family.
While layoffs are beyond your control, take these steps to safeguard your finances:
Stay Informed: Monitor official agency communications about potential layoffs.
Know Your Rights: Familiarize yourself with federal RIF procedures, benefits, and available options.
Update Your Resume and Skills: Refresh your resume and explore new skills for potential career opportunities.
Plan Financially: Review your finances, create an emergency fund, and reduce expenses to prepare for potential job loss.
Managing Your Thrift Savings Plan (TSP)
If you leave federal service, you have several options for your TSP. You can change your investment allocations, transfer your TSP funds into another qualified retirement plan, or leave your TSP account as it is. If you have an outstanding TSP loan, you'll need to make arrangements to repay it. Remember that unpaid TSP loans may be considered taxable distributions.
I know this can be overwhelming, but you don’t have to navigate it alone. If you or someone you know has been affected by layoffs, please reach out to me for guidance or share this information with them. I’m happy to support you however I can.
~Alex
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