I hope this message finds you well and that you are enjoying this beautiful spring season.
It is hard to believe we issued our first communication regarding the coronavirus on January 30, 2020. At that time, we could not have imagined the impact such an event would have on our lives. As with all momentous events, there were both positive and negative ramifications. The negative effects of the pandemic have been wide and deep, and included the loss of loved ones; the inability to be physically present to comfort those who were sick; business closures; extended periods of homeschooling while juggling working from home; and the list goes on. Our essential workers and those less fortunate in our society bore an especially heavy burden.
Yet, amidst the hardships there were positive outcomes. Many of us reevaluated our priorities, focused on simplification, and learned to connect with family and friends in new ways. Our resiliency was tested and strengthened, and we gained greater appreciation for our loved ones.
Just as spring was arriving and we were hoping life was returning to “normal,” Russia invaded Ukraine. The invasion is resulting in significant loss of life, destruction of entire cities, hunger on a massive scale in nations dependent on Ukrainian crops, and tremendous uncertainty in the energy markets. Add to this, punishing sanctions imposed on Russia to end the invasion and already increasing inflation around the world, and we end up in a very uncertain time – once again.
Markets can react in exaggerated ways to such uncertainties. After all, they are driven by people - and we know how people can react to things. Fear and uncertainty are impacting behavior and driving market moves. People are bailing out of their long-term investment strategies, based on a lot of noise and uncertainty, to ultimately to feel better and safer. However, they are reducing the chances of their investment success whenever they behave this way.
What Should You Be Doing?
Stick with the investment strategy we’ve created together. The economy is slowing a bit, inflation is very high, interest rates are rising - all things we’ve discussed during our client meetings and suggested are part of normal market and economic cycles. The Ukraine situation amplifies fear and uncertainty, but such geopolitical events/wars have historically had a short-term impact on markets. Generally, markets have been on average 2% higher three months after the geopolitical event and on average 5% higher six months after the geopolitical event1.
You have always done the right thing. You contact us when you have questions, concerns or just need a little reassurance! Please do not hesitate at all to do the right thing and contact us any time you need to. It’s what you should be doing. By doing so, you’ve avoided making the kinds of investment mistakes so many people experience as a result of media noise and emotions.
As I think about the past two years, considering today’s current situation, it is worth remembering a few things:
- One of our top priorities is to ensure your financial plan and investment strategy are aligned to your specific needs, and position you well for challenging times – whenever they may come.
- Staying invested, focusing on the long-term and not panicking out of the market are strategies that have consistently worked well.
- Despite year-to-date stock market declines, the annualized return of the S&P 500 is 11.7% per year for the past five years2. Rather than focusing on how your balances have fluctuated the past few months, we encourage you to focus on how they’ve grown over the past four to five years.
- Financial market volatility is a separate issue from financial system stability. I see no reason at this time to question the stability of the financial system. It’s important that we put media noise aside when making prudent financial decisions.
- Generally, markets have been on average 2% higher three months after a geopolitical event and on average 5% higher six months after a geopolitical event1.
- The invasion by Russia should have limited impact on markets in terms of Russia’s representation of the global economy and markets.
During this period of uncertainty there is still much for which we should be grateful including, highly effective vaccines, strong US economic fundamentals, and unity amongst our Nation’s strategic partners and allies. Nonetheless, I realize how difficult it can be to watch the news and see your account balances fluctuating so much. Please draw on your past experiences of which there have been no shortage of major political events, wars, terrorist attacks, major recessions, and even a global pandemic that shut down most of the world. The most successful investors remained invested through these major market events, bought during the downturns and filtered out the noise.
Our top priority is acting in your best interest, allowing you to focus on other priorities of your life and have peace of mind that you are doing all you can to help make sure everything is going to be okay. Please remember, we are here for you. Reach out to me – day or night. As always, we will help to get you through this so you can continue living your best lives. Thank you for the opportunity to serve you.