What We'reThinking: Step back. Scan wider. Embrace the opportunity.

 

 

Congratulations. You’ve just lived through one of the deepest 6-month stock market declines in history.

As we wrote last month, economic and financial matters have gotten a bit ragged. The price of just about everything is suddenly higher. Stock and bond prices have fallen together-- a rare event in itself. Consumer sentiment is at historic lows.

The deep 6-month decline in stock prices has impacted every investor except those who’ve capitulated and gone to cash. (When and how will they know when it’s safe again? Good luck with that.) Typical balanced portfolios that most people own (including us) are down 14% to 18% just this year. If you’ve contributed to a workplace savings plan, that’s softened things a bit. But if you’ve made large withdrawals, that’s just added to the headwind.

So, where do we go from here?

Good news. History is on our side. The table below is a list of the worst 6-month return periods since 1971. But look what happened in the following 3-, 5-, and 10-years. It’s all green. On average, returns rose 56%, 115%, and 281%. This looks like a great set of probabilities.

Here’s a different perspective from Ben Carlson at A Wealth of Common Sense. It shows what happens after recessions. Again, all green in the following 3-, 5-, and 10-year periods. Recessions are one of the best times to get more aggressive.

The real pain of recession is that many people will lose their jobs. Many will have to relocate. Even more will have to figure out new ways to make ends meet. The setbacks will be financial, mental, social, and physical.

So, if you’re reading this because you’re concerned about your portfolio, consider yourself lucky. Your portfolio will be just fine.

Here’s some simple wisdom to rely upon during times like this.

👉Successful investing is highly counter-intuitive. Being a news junky is counter-productive.

👉Your investment experience will mainly be the result of your behavior. Evidence shows that investments do better than investors.

👉Every bear market, without exception, has actually been the base from which an advance to new all-time highs is launched. The bigger the base, the better the case.

 Still, you might have some questions.

• How should I handle inflation in my financial plan?
• How will rising interest rates impact my plan?
• What’s the best way to prepare for a personal recession?
• Will I still be able to retire when I want to?
• When should I start taking Social Security?
• Should I consider Roth conversions?
• Is my estate plan, with the proper beneficiaries and trusts in place?

We’re here to have those conversations with you. They can have a significant impact on your peace of mind now, and your well-being later.  

Step back. Scan wider. Embrace the opportunity.

Warren Buffett: When in doubt, zoom out.

James Cosgrove, CFP, Plano, TX jim.cosgrove@verizon.net 972-489-0262
Jim Cosgrove, Partner, San Jose, CA jimcos42@gmail.com 408-674-6315 Twitter@JimCos542 

Evidence-based. Rules-driven. Policy-focused.