To our clients and associates,
Feeling anxious? It is certainly understandable if you are. Think of all that has happened in the past two years. First we’re hit with a worldwide public health crisis, the likes of which has not been seen in a hundred years. Many of us with children and grandchildren quarantined at home while trying to survive a whole new work and education paradigm.
Then we had to deal with perhaps the most divisive and bitter presidential election in our lifetime.
Next comes supply chain bottlenecks and soaring inflation that has reached 8.5%, - the worst in 40 years. To counter this, the Federal Reserve must invoke its go-to option of raising interest rates.
And now a madman decides to invade a sovereign nation and callously destroy the lives of millions of innocent people.
Yet, I remain optimistic. You may ask, how is that possible? I would respond by pointing out that in my thirty years of investing professionally, we have seen it all before. Okay, not the pandemic, which is essentially now under control at least in most countries, but certainly regarding all the other world events. We have been there, done that.
Let’s step back and take a look at history. Everything that is happening today parallels an equivalent time in the past. The world even survived the 1918 Spanish Flu pandemic – without the wonder drugs and antibiotics that we have today.
How should the average investor respond? Historically, bonds are a refuge when stocks are volatile. Unfortunately, bonds perform quite poorly in an inflationary environment with interest rates rising. Stocks on the other hand, are the single best way to handle a high inflation environment, but not necessarily when there are supply chain problems and the threat of another world war.
While moving to cash may be tempting, history tells us that when the market turns, it does so rapidly. Those who remain invested will be in the best position to capture the benefits of the upturn.
Once inflation is under control, interest rates can stop rising or even come down, which will improve the bond environment. When the war appears to be ending, stock prices can get back to reflecting their future potential.
This is why at this point the best solution is to maintain our positions in broadly diversified, low-cost baskets of ownership in the world’s greatest companies.
In times of anxiety, allow my team and me to take the worry of investing off your shoulders. It is why we are here; it is what we are trained to do. We will continue to do what we do best: invest our clients in a way that provides the potential for building and maintaining wealth over the long term.
As always, please feel free to contact your advisor with any concerns or questions you may have.
I wish you the very best,
Past performance is not indicative of future performance. Loss of principal and/or loss of portfolio value are possible.