When it comes to figuring out the economy, let me borrow the famous line from Charles Dickens: “It was the best of times, it was the worst of times….” If you follow the economic headlines, trying to make money decisions that impact your life, it’s understandable that you might be confused. Economists are confused, too!

There’s a lot of good news to cheer about:
—The latest reports say the economy is growing at a 6.5 percent annual rate, the best growth in years. As one economic report put it: “The U.S. economy has more than recouped the output lost during the coronavirus recession.”

—The stock market is at all-time highs, as I write this. Interest rates remain low, despite worrisome signs of inflation in consumer prices.

—Mortgage rates remain at record lows, and home prices (America’s largest investment) soared 16% over a year ago in the most recent month (May) just reported.

—And the value of that old car you’re driving may have doubled!

—Consumer confidence has gained in each of the last three months.

—Corporate profit reports are setting records.

—The Federal Reserve says things will be fine, and that we shouldn’t worry about inflation.

So why worry? What could go wrong? Well, here are some things to consider:

—The delta variant of the coronavirus threatens to slow the economy if we do not shut it down again.

—We’re about to reach the national debt ceiling, and getting Congress to raise it is not a sure thing. (Sure we need discipline, but if the U.S. can’t pay interest on its debt or pay its military and public servants, it’s a real crisis.)

—The mortgage foreclosure forbearance period has ended, and the more than 7 million people who took advantage of the program will suddenly be required to make some payments. (The administration says federally insured mortgages can get a 25% payment reduction by working through servicers).

—Also, the moratorium on evictions has ended and will not be extended. That brings up the specter of furnishings being pushed out on front lawns and tearful families searching for shelter.

—As well, student loan payment forbearance will end in 60 days, requiring people to start making payments even if they don’t have jobs.

Dealing with good news and bad

Your view of the economy certainly depends on your personal circumstances. Those with jobs are getting pay raises. Those without jobs will soon be without income.
Stock investors are benefiting from money flooding into the economy, thanks to the Fed. And savers are suffering from rates that are actually negative. (If money in the bank earns less than 1%, with inflation running at over 5%, cash is a true losing proposition.) Yet taking risks of loss in the stock market isn’t wise, either, for many retirees.

So, what should you do?
This is the perfect time to do a mid-year review of your finances and your investments. Knowing where you stand is essential to making decisions about where you’re going.
The second thing is to stop trying to make sense of the headlines. Only about half of the market forecasters will be right!

Let them go out on a limb with their bullish or bearish forecasts. What you need right now is balance. That means having some exposure to the stock market for the long run of your retirement and yet enough cash so you won’t panic if the market goes to an extreme.

Now, while things are relatively calm, is the time to get your plan organized. And then make sure you have the determination to stick to it and not take hasty actions out of panic.

I also recognize that this advice applies to those readers who have the flexibility and assets to focus on these decisions about investing and saving. All around you are others who are on the brink of economic disaster, facing the worst of times. Giving them just a bit of help with one month’s rent or groceries is an investment that will have inestimable rewards. And that’s the Savage Truth.