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Recession odds were the topic du jour Monday as stocks kicked off the week with a wobbly, uneven session.
Over the weekend, former Goldman Sachs chief Lloyd Blankfein told CBS' Face the Nation that recession was "a very, very high risk factor." That opinion was met by a number of other calls Monday morning.
SEE MORE The 22 Best Stocks to Buy for 2022
Wells Fargo Investment Institute, for instance, says "our conviction is that the chances of an outright recession in 2022 remain low" but believes odds are growing that 2023 could see an economic contraction. UBS strategists say the chances are different depending on where you look - their global economists say "hard data" points to a sub-1% chance of recession over the next 12 months, but the yield curve implies 32% odds.
"There's no crystal ball to predict what's next, but historical trends can come into play here. With the [S&P 500] closing 15% below its weekly record, there's only been two times in the past 60 years that the market didn't fall into bear territory after a similar drop," adds Chris Larkin, Managing Director of Trading at E*Trade. "This doesn't mean it's bound to happen, but there is room for potential downside.
Larkin says to keep an eye on major retail earnings this week - which will kick off in earnest with Walmart's Tuesday report - to get a pulse check on the American consumer.
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Monday itself was a fairly quiet affair. Exxon Mobi
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While a down market may not be a fun time for investors, there are some bright spots and opportunities to be had. Stock market drops like we've seen recently might make a Roth IRA conversion more appealing as a strategy for investors.
SEE MORE 2 Alternatives to Required Minimum Distributions
Should you consider converting a traditional IRA to a Roth during a down market? There are a few things to consider before pulling the trigger.
What is a Roth Conversion?
Before you embark on a Roth conversion, you need to fully understand what it is. When you have a traditional IRA, those are pre-tax dollars that you're investing. While the money grows tax-free, when you later go to take a withdrawal, every dollar you pull will be taxed.
With a Roth IRA you are investing post-tax dollars, and when you convert a traditional IRA to a Roth, you pay the full tax during the year that you convert, at ordinary income rates. Then, the dollars that you've converted will grow tax-free for the remainder of the time that they sit within the investment. When you later take money out of a Roth, it's all tax-free, as long as you are 59½ or older and follow a few other rules.
What You Need to Know About a Roth Conversion in a Down Market
When you trigger a Roth conversion, you'll be responsible for paying the tax due on any pre-tax contributions or earnings within the traditional IRA. The benefit here is that if the market has dropped, it's likely that your IRA value has dropped along with it - so your full value has gone down, and you'll be paying taxes on the current value (which is lower, due to the market being down than it was months ago). So, in theory, you can convert a l
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