HEADLINE “Inflation, Recession And a Frantic Bear Market”
A Tough Year So Far
As you may or may not know, the S&P 500 was down consecutively for every quarter this year which hasn’t happened since the depths of the Great Recession of 2008-2009. In fact, the all-time closing high for the S&P 500 happened on the first trading day of 2022 with a close of 4,796. By Sept. 30th (three quarters later to the day) the index had fallen just over 25% to the level of 3,585 thus completing a double dip bear market inside of 5 months.
Now add record 40-year inflation, talk of recession and bear markets and it’s no wonder everyone is on edge. In fact, a spike this big in news articles about a bear market hasn’t been seen since the height of the Corona Virus Pandemic when the whole world was in lock down mode and life as we knew it was seemingly over.
Throw on top of that an outbreak of war between Russia and Ukraine coupled with the highly charged and hyper partisanship nature of our current political environment which is only a month away from the outcome of a mid-term election in which “the world is going to end” depending on who gets elected and its easy to see why doom and gloom fill the skies. I’m sure I’ve left some things out, but I don’t want to spoil your weekend!
As most of you know, I’m a glass is ¾ full kind of guy. You may call me a hopeless optimist, but I fancy myself as more of a realist. Using the whole of human history, which is our only true guide, our best days are always in front of us and to all of us long-term, goal focused investors that should be great and comforting news! The only action that is required of us is to stick to our plans and ignore the siren’s songs of the financial news pornography that we are assaulted with on a daily, no, hourly basis, which admittedly is much easier to say than to do.
I do feel sorry for the person caught in the cycle and jumping from fad to fad in the hopes of beating the market or looking for any port in the storm. I was trained to sell at a large wire house so I know all too well the catch phrases to look out for, just to name a few:
- Alpha, market timing that outperforms a benchmark, or
- Absolute Return, in essence using a mix of strategies so sophisticated and complex I don’t think even the people selling these strategies fully understand them, and my favorite…..
- The promise of Lower Volatility with Higher Returns Strategy, essentially achieving equity like returns with bond like volatility
It’s easy to see why that last one is my favorite; I mean who wouldn’t want that right? Truth be told, in my early days of cutting my teeth (and actually for longer than I’d like to admit) that is the one I gravitated to because it seemed like the best way to get my clients to their goals and have them never lose sleep at night. Sadly (or predictably), none of these end up working over any meaningful time period so in the end the investor by default is left to performance chasing among them which is the worst strategy of all and quite possible the death kneel of their retirement hopes and dreams.
I don’t know when this current storm will pass but I do know that it will. I also know that another one is certainly around the corner in the future. Such is the nature of the markets. Temporary declines interrupting the permanent advances. We can not get rewarded long-term superior returns over “safer” alternatives without riding out some storms. So be it. I didn’t mention this in my opening paragraph, but after the last 3 consecutive quarters of negative performance of 2008-2009, the S&P 500 then proceeded to have an average annual return of around 17% for next 14 years! One of the best bull runs in history. Now, please don’t mistake me for making a market call, all I am suggesting is that there is a good chance our best days are still ahead, all we need to do is stick to our plans and tune out the noise.
As always, at DCH Wealth Management, it is our honor and pleasure to serve you! If you would like to discuss this (or any topic) further, please do not hesitate to give us a call. Also, some of you may know some family and friends that could benefit from this article so please feel free to pass it on, they do say that sleep is the most important thing for your heath!
P.S. I almost forgot, that headline I teased in the subject of the email was actually from the cover story of Life Magazine’s June 5th, 1970, issue.
On that day, the S&P 500 closed at 76. I don’t know where it will be when you are reading this but I bet that it is multiples of that right now.
Friends, this too shall pass.
This is being provided for informational purposes only, and should not be construed as a recommendation to buy or sell any specific securities. Past performance is no guarantee of future results, and all investing involves risk. Index returns shown are not reflective of actual performance nor reflect fees and expenses applicable to investing. One cannot invest directly in an index. DCH Wealth Management, nor any of its members are tax accountants or legal attorneys, and do not provide tax or legal advice. For tax or legal advice, you should consult your tax or legal professional. The views expressed are those of DCH Wealth Management and do not necessarily reflect the views of Mutual Advisors, LLC or any of its affiliates.