No Gain Without Pain
Missing 2020 yet?? Welcome to the price of play. It was easy to sit back over the past two years and assume “this is easy”. Wouldn’t life be nice if it was ALWAYS that easy? Unfortunately, that just isn’t realty. But fear not, because that’s why we are here.
I’m sure many of you are sitting at the edge of your seats wondering when is enough finally enough?! Well, I am here to remind you that now is not the time. We are still hanging tight and here is why….
What do we know? We know that unemployment is low, consumers are coming out of the pandemic cash rich, and we know they are spending. Just look at corporate earnings. Traditionally speaking, if we were heading to recession, we would see those numbers reflected in earnings. On top of consumer spending, Covid concerns are rapidly slowing. What does that mean? Well, let me ask you: do you have any upcoming travel plans, or have you finally taken that trip you postponed the last few years? Yup. You and everyone else. People are ready and eager to get back out there and travel, with that comes even more spending. More spending means a boost in our GDP. All good things.
Next, we have midterm elections coming up. Most likely we will see a split in both congress and the White House. The market likes that. A split means things are at a standstill, nothing gets done. And while that might not sound good from a political standpoint, the market appreciates the stability- and we all appreciate market stability, right?
We often get the question: “is it time to sell? Should we go to bonds?” Our answer: NO.
First of all, we don’t want to run to bonds. As we all know, interest rates are on the rise. Long-term bond investments are too sensitive to rate rises. However, that doesn’t mean we are stuck. As I mentioned earlier in the year, high quality equity is good place to be. We are in unprecedented times (as we have been the last 2.5 years…). Some are crying inflation, but numbers and fundamentals are showing a potential for growth. We have rising interest rates, supply chain issues, and simultaneously have a country that has positive cash flow and are ready to spend (usually not the case in recessionary environments) The bottom line is this: we are going to have volatility, we warned of this in the beginning of the year. Expect this to continue, but remind yourself of two things:
- We never want to sell at the bottom. It’s okay to be nervous, but remind yourself of your time horizons, and remind yourself that selling at the bottom is how you get burned in these markets.
- Now is the time to invest. Just like we search for the best sales on our food, clothes and gadgets, we also want to shop the sales in the stock market. And right now almost everything is on sale. If you’re wanting to fund your IRA, process a rollover, or make any contributions, now is a great time to do so.
Lastly, I’ve attached a great graphic that shows the infra-year declines as compared to the year-end results. “Intrayear declines in the S&P 500 have averaged -13.7% since 1952, yet annual price returns have been positive in 51 of those 70 calendar years.”
So what’s the moral of the story? Stay the course. It’s okay to have some fear, it’s a normal human response, but remind yourself that reacting to your emotions too soon can cause you more harm than it would to just sit tight. This is your reminder to not act on your emotions, call or email us if you need to be reassured, but remember that we are here. We are watching, and we are always ready. Hold on to your hats, because it may be a bumpy ride, but for now, we say this not enough to sell out.
As always, we are here for you if you ever have any questions or concerns. Hoping you are all staying healthy, safe and happy!
God Bless.
Anna Brockschmidt
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