2022 August
As readers of our Market Views, you know our opinion for all of 2022 has been (and it still is) to stay calm and carry on. It can be tempting to allow concern to creep in with economic headlines shouting about inflation, interest rates, volatile markets, wars, various diseases, and the ongoing debate on if we are technically “in a recession” or not.
If you are wondering if it is time to be concerned, the answer is still a resounding NO! History, like memory, is a funny thing. We can vividly describe our current situation or pain, but the memories of past injuries are faint. Hindsight is 20/20 and our memories can fade or intensify with the perspective of time.
Indulge us as we take a stroll down memory lane to revisit a small sample of past headlines that can help you put our current financial situation into perspective.
“Trying to Fight Back: Inflation, Recession, Oil” (Time Magazine, Oct. 14, 1974)
“Some Bad Blips in the Economy…The latest economic statistics left room for optimism, but the news that made headlines was another high in consumer prices...” (The New York Times, Dec. 3, 1978)
“The Federal Reserve Board, alarmed by new figures showing worsening inflation, announced yesterday another 1 percentage point increase in interest rates and warned it will tighten credit still further if this action does not work.” (Washington Post, Feb.16, 1980)
“From Euphoria and Optimism…To Reality and Pessimism…Yet for all its promise, this was a year when anxiety replaced euphoria, when the threat of simultaneous war and recession dissipated hopes for continued peace and prosperity, and when the rekindling of old conflicts dashed visions of a more promising world order….” (Washington Post, Dec. 30, 1990)
“Looking Beyond the Bear. Yes, it’s scary out there, but a recession isn’t a sure thing. Here’s Why.” (Time Magazine, Mar. 26, 2001)
These headlines are from decades ago, but the Great Recession that lasted from 2007 to 2009, the Stock Market dive in December of 2018, and the beginning of Covid in March 2020 are recent enough that most of us remember the apprehension and uncertainty that we felt during each of these worldwide financial crises. Recessions, inflation, war, the pandemic, and volatile markets are all real. We are not going to underestimate our current economic situation. We are going to reaffirm that we have been to similar places of uncertainty before, and we know how to navigate and get to the other side. While there is no one-size-fits-all cure for what ails us, time-tested strategies that have seen us through in the past are still sound advice for today.
Recognize that market downturns, followed by market recoveries, have happened before, and they will happen again.
Just like the headlines above show, we have been through many times of economic uncertainty and followed economic recovery and growth throughout history.
Don’t lose sight of the big picture.
Daily, anxiety-driven balance checking is not healthy, instead, revisit and remain committed to your long-term financial goals.
Keep your emotions out of your decision making.
Emotions can lead to irrational and impulsive decision making, including the herd mentality that encourages buying high and selling low. This is why people with an advisor have greater long-term returns.
Stay invested so you don’t miss out.
Investors who pull the emergency brake and bail out during a market decline almost always lock in a loss on their investments. And if they stay out of the markets, chances are good they’re going to miss the recovery, which further compounds any losses.
Keep your investment strategy in line with your risk tolerance.
Most things in life involve some risk, just like investing has risks. You can’t eliminate all risk, but it is important to understand how much risk you can tolerate and how much risk is needed to reach your goals. If it sounds too good to be true, it probably is.
Keep your portfolio diversified.
Don’t put all your eggs in one basket and don’t take unnecessary risks with your nest egg. Diversification isn’t about having thousands of holdings, or dozens of accounts with multiple firms and advisors. It involves understanding the math of standard deviation- how much risk you are assuming to get the returns you are getting.
No one can know the exact details of how long any economic cycle will last or how fast and long an up or downturn will be. But there is one thing that remains the same: Knowing what you own and why you own it, with the control that comes from owning good quality individual securities will seldom disappoint.
Give us a call or send us an email if you want to talk – we always want to be sure you feel confident about your financial situation today AND in the future. We’re here for you.
