As of May 18th, equity and bond markets have continued their downward trend, but we at FSB remain bullish on the markets. Back in 2021, we highlighted the high rate of growth and projected slower growth for 2022 and coming years. We are seeing just that as most companies have shown slowed, but very sustainable growth and earnings so far.
We anticipate the Fed to raise rates in June and July respectively, and we believe that this is paramount in taming inflation, reducing the chance of a near term recession, and healthy for the overall economy. This impacts growth companies that have higher debt more-so than well established companies, which is why the majority of the recent market drop has been in stocks that have outperformed in the past 5 years. We believe the stock market has priced in the effect of current events like the ongoing conflict in Ukraine as well as future interest rate increases. We see the current volatility as an opportunity in US and International Markets.
At times like this, it is good to put the current downswing into perspective of past events, and recall fundamental values and ways of thinking about market downturns. Below are some great insights into the current situation and other tips that have stood the test of time:
- Recessions and bear markets are a normal and healthy part of the economic cycle, regardless if one is in the near term or long term. In fact, there have been 10 bear Markets, and 6 recessions dating back to 1980.
- Any long-term goal, similar to life goals, has setbacks and challenges to overcome. Stay the course.
- Investors who “jump in & out” to time the market typically get it wrong. They may get it right on some days, but an investor with a long term and consistent strategy wins over time. Don’t let sensationalized journalism and news deter your plan, and cause long-term regrets.
In regards to inflation, here are some strategies to help mitigate its effects:
- Cutting down high interest debt, and creating a budget are good strategies.
- Maintain an emergency fund of 3-6 months of expenses.
- Consider higher yielding investment routes for idle cash that is not being used for a near term goal. We are here to help educate you on your options.
As always, we are here to put your mind at ease and help you stay the course in navigating the complexities of the markets today. We believe the above principles will prevail regardless if you are nearing retirement, retired, or just starting out. If you, your friends or family have any questions about the current market movements, or want help planning, please give us a call.
Written by:Jacob Stalder
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