Ukraine People, War and Markets
A Letter To Our Clients:
I’ve been up all night monitoring the most telegraphed war and how it will affect markets around the world. First and foremost, my heart goes out to the good and innocent people of Ukraine who are being uprooted, hurt or worse because of this senseless act of war. I have prayed for them and will continue doing so. Let’s hope this ends soon and they won’t have to flee their beloved country to find peace and safety elsewhere.
I’ve shared with you that we get paid to take emotion out of the decision-making process and this is a time when we hopefully bring the most value to you, focusing on the long-term wealth for our clients. It’s human nature to think with our hearts and investors will want to sell out of stocks because of fear after they have gone down. However, that’s when they truly realize losses, otherwise the losses are only on paper. It’s easy to panic and have knee jerk reactions to headlines around the world by selling, the problem is that when the markets turn around investors are left on the sidelines, and they miss out on the markets recovering their losses. I’ve said often that financial shows like CNBC get paid to keep viewers watching and when people are fearful, they watch more, so it’s expected that CNBC and others will create breaking news stories every few seconds to keep viewers glued to the tv. Please know that we are watching the markets on your behalf and will be pro-active to making changes that we feel are prudent.
You’ve heard me say that volatility creates opportunities with regards to investments and this is no different. So let me share with you what I tell investors who ask if they should sell because the markets are down. “If you had cash to invest, would you be looking at buying stocks now or would you wait until the markets creep back up?” The reasonable answer is that when there is blood in the streets, investors make money by buying low and profiting when the markets bounce back. This may be a good time to invest.
The stock markets never like surprises and here is what we know already; Inflation is as high as it’s been for the past 42 years at 7%. Before this Russian attack, the Fed was expected to begin hiking interest rates sooner than later but now that may not happen as they have more to watch than inflation. Oil is over $100 a barrel which will add to higher energy costs and less money in consumers’ pockets who make up almost 70% of our economy. We know this already, so do we have a market that’s baked in almost a worst-case scenario? When there is better news, how soon before the markets rally?
Since 2009 we have had seven corrections/bear markets including this one where the markets were down (-16%), (-19.4%), (-13.3%), (-10.2%), (-19.8%), (-33.9%) and this one around (-12%). Some investors felt like the world was falling apart for some of these and may feel uneasy about owning stocks now as well. I’m not saying that the markets won’t go lower, but the S&P 500 is in correction territory trading where it did in June 2021. It never feels good to see corrections in our portfolios, but over the past 39 years, the average swing in the markets, high to low, peak to trough, has averaged (-14%), year in year out and so far, this is average.
We are in unchartered territory again, just like we were with the Dot.Com bubble 22 years ago, the Great Recession 15 years ago and Covid-19 2 years ago. There will be a day when we think back and this will be a distant memory, kind of like when Covid-19 hit and markets fell (-34%) in a few short weeks before quickly recovering. How many have looked back to early 2020 and said I wish I had cash and courage to invest, but in hindsight, everything is crystal clear. The markets have always recovered from anything and everything. This has happened throughout time, and it will from this as well.
As I finish penning this email, the markets are off their lows, and Nasdaq has actually turned positive after being down (-3.5%) earlier, a good sign for sure. Please reach out to us if you have concerns or would like to just talk about all that’s going on. My talented team and I are here for you. If you feel that your tolerance for risk has changed, then let’s talk about it.
Stay well and thank you for the trust you’ve placed in our firm to manage your wealth. I can promise you I don’t take it lightly.
President & CEO