FIRST THAT! THEN THIS! NOW WHAT?
"THE ANSWER MY FRIEND IS BLOWIN’ IN THE WIND"
BOB DYLAN - MAY 1963
Sometimes it just feels like we are all dealing with one (damn) thing after another. First came a global Pandemic; something that had not happened for over 100 years. Uncertainty, fear, and worse. Then came a massive economic upheaval. At one point in early 2020, the US Stock Market (as measured by the S&P 500 Index), was down over 34%.
Then vaccines were developed, we all made adjustments in our lives and slowly things improved. As we moved through 2021, the US Stock Market recovered and ended the year up 29%, people were returning to work, unemployment hit multi-decade lows and Wall Street continued to feast on continued low interest rates. Companies with record profits embarked on another round of stock buy-backs which in turn fueled the continued run up in stock prices. The supply chain bottlenecks began to improve.
Happy Days are here again! Let’s get the party started!
Then we watched in horror as Russia attacked Ukraine, sparking one of the worst humanitarian crises since WWII. It felt like we were all once again staring into the Abyss. Because the world is now so interconnected, what happens somewhere else is no longer an isolated event. We experience the fallout here as well. And since Ukraine agricultural production feeds over 30% of the world, the war has had a huge impact on global food supply which in turn adds fuel to the fires of rising inflation.
Post-Pandemic consumer demand, low interest rates and increasing geo-political uncertainty have all conspired to drive global inflation (currently running close to 8% annually per the US Consumer Price Index) to highs not seen since the late 1970s and early 1980s. Remember long gas lines and 14% mortgage rates? Just recently the World Bank warned of the potential return of Stagflation; the unhealthy combination of a stagnant economy coupled with rising prices. Our own Central Bank, the Federal Reserve (the Fed) has the unenviable task of taming inflation while simultaneously trying to keep the economy from falling into a Recession.
In my 35 year professional career, I have guided folks through many challenging times. Whether it was the unprecedented 25% one day drop in in the stock market in 1987, the dot-com bust of early 2000 or the Great Recession of 2008-2009 which saw an almost 50% market meltdown, one thing I know for sure is that financial markets are always changing.
Another thing I know to be true is that a well-designed Financial Plan, while not totally immune to the virus of market swings, can still serve as your healthy guide through challenging times.
So now we find ourselves in a Bear Market, defined as when the stock market averages drop more than 20% from their recent highs. Since 1987, there has not been even one year where the stock market sailed through any year without some period of decline. In every single year, these intra-year drops ranged from minus 5% to minus 48%.
Yet over this same 35 year period, the total year end returns for each year were actually positive over 80% of the time!
WHAT WE CAN DO TOGETHER
Before I sailed a boat for the first time I used to think that it was the direction of the wind that would determine where I ended up. I was at its mercy. If the wind was not what I wanted or expected, then I could not reach my goal.
Then I learned what mattered most was not the direction of the wind but the set of my sails. Armed with this knowledge, I could simply follow my plan with confidence and ultimately reach my goal no matter which way the wind blew!
So here is what I suggest we do together. Let’s review your Financial Plan, adjust the set of your sails if needed, keeping you on course for financial security and peace of mind. We are here to listen, to help and to guide. You can rely on our decades of experience through all the stormy seas.
You see, the answer is still Blowin’ in the Wind.