In Our Opinion
As the famous philosopher (and baseball player) Yogi Berra once said, "It's tough to make predictions, especially about the future."
Here's hoping that the start of the New Year has kicked off with a renewed outlook on getting back to a life that's a bit more normal. It's our hope that we're heading into the final innings of Covid restrictions, and that gatherings at large venues, social events, and office parties are back in vogue soon.
On the economic front, Covid has left us wondering, "Will inflation ever settle down? Will an abundance of food ever be back on the grocery store shelves? When will I be able to haggle over the price of a car again?"
Sometimes we feel like we're living in that spot where we're leaning back in a chair and catch ourselves just before we tip backward. Today we're balancing uncertainty with possibility, and frustration with hope for kindness.
We've always been an optimist when it comes to our clients' financial futures. Despite the exaggerated headlines, the often-misleading social media posts, and the belief that every issue in our country is politically tainted; We believe in American industry. Our government? Well, that's a story for another day.
Recently, the stock market hasn't performed as well as we might like. But in all honesty, we've been very spoiled. Despite structuring your portfolio to mitigate against wild gyrations, there will always be times when accounts drop in value. In fact, pullbacks of 5-10% are not only normal but they are also expected – and they're built into our long-term planning.
Take a look at the chart below. It tells the story that drops in the market (as measured by the S&P 500) are not only normal, they happen quite regularly. However, in the end, markets continue to recover and move forward. Surely you can recall the extreme negative headlines during the Dot-Com Bust, the Terrorist Attacks of 9/11, the Financial Credit Crisis, the Transition of Power in the White House in January of 2017, and, of course, the onset of the Coronavirus. Each time, talking heads would scream – "This time is different." Perhaps it was, at the moment. But America has always recovered. We are a land of optimism, innovation, hard work, and grit.
Source: LPL Research, FactSet 01/20/2022 (1980 – Current)
All indexes are managed and cannot be invested into directly. Past performance is no guarantee of future results.
Today, in our opinion, the American economic engine is in the midst of a brief reset. The basic economic principle of supply vs. demand is showing its true colors – and it has impacted the pocketbooks of families across the country. When there's not enough supply of a product, sellers can demand a higher price (think houses, cars, food, KN95 masks). And, generally, the product goes to the highest bidder.
We believe that today's inflationary issues are driven by an inability to have products manufactured, transported, and stocked on the shelves. Yes, Covid is the culprit in this problem. But for the most part, it's a people problem. As workers return to their jobs, vaccinations increase, and the viral load of Covid's contagion weakens, we'll return to normal (though likely a new normal). While there are times when it doesn't feel like it will change, you know (deep down) that over time it will – it always does. This time isn't different either.
When your January statement arrives in the mail (or your inbox), it's very likely that you'll see a total value that's lower than the prior month. My guess is that the drop (from a percentage standpoint) won't be as big as you may have thought – but the change in number may leave you feeling a little unsettled. For many, it's the first time you've seen a pull-back in a while. This is NOT a reason to sell out. Suffice it to say, that portfolios don't always go up – even the most conservative ones.
At Freedman Financial, your portfolios are part of a carefully crafted, highly personalized financial plan. We know that your accounts will fluctuate, and even though you know it too, it's never a great feeling when you open an envelope and see your portfolio value less than what it was previously.
When we invest for you, we invest for a much longer time frame than one month, one quarter, and even one year. Periodically there needs to be resets, and we're going through a normal reset right now. Will it end soon? Probably. But honestly, we don't know. We are, however, very confident that patience is a virtue and that you'll continue to be rewarded over time.
As always, all of us at Freedman Financial are here to answer any questions you may have. Here's wishing you continued good health, happiness, and prosperity in the years to come.
The opinions voiced in this material are for general information only and are not intended to provide specific advice or recommendations for any individual. All performance referenced is historical and is no guarantee of future results. All indices are unmanaged and may not be invested into directly. All investing involves risk including loss of principal. No strategy assures success or protects against loss.