While most investors and their advisors are happy to say good riddance to 2008, the collective wisdom among economists and investing executives like Edward Campbell, VP and portfolio manager for Prudential’s Quantitative Management Associates (QMA), is that the global financial crisis that struck last year “will usher in a year of global recession and deflation risk for 2009.”
To be sure, the market upheaval of last year has turned the retirement system on its head, and industry officials are predicting a bevy of legislative and regulatory proposals to be introduced this year that affect retirement plans as part of financial services reform. New retirement plan product designs will be on the horizon this year as well. Among the other questions looming large for 2009: What’s in store for the 401(k) plan? What will become of the 408(b)(2) fee disclosure regulation and service provider rules?
To investors’ chagrin, the recession in the U.S., which began about a year ago, Campbell said in early January during Prudential’s economic and retirement outlook event, “is likely to be deep and long and worse than the 1973-74 recession and the 1980-81 recession,” but won’t result in a full-blown depression. Last year, the global equity markets were “cut in half and all risk assets including commodities, real estate, and high-yield bonds saw significant double-digit declines resulting in the destruction of about $30 trillion in overall wealth,” said Campbell.
However, as Edward Keon, managing director and portfolio manager for QMA, noted during the event, while the outlook for the economy “is pretty grim, the outlook for the stock market may not be nearly as grim–the best year in stock market history was 1933, while the Great Depression still had almost a decade to run.”
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