“It’s been a lot of fun to see some fruits of my hard labor” – Tiger Woods
In many ways, individual investors are often their own worst enemies. Our goal at B P Financial is long-term wealth creation for our clients.
Nothing drives me crazier than when people say things like, “The market isn’t for me.” Or “I’m not in the stock market.” “The so called experts are saying a recession is coming so I need to sell it all and wait”
Yes, you’re in the market because you’re in the economy and, whether you realize it or not, you’re making other people rich. From the moment you wake up, you’re in the market. It doesn’t stop on your terms and start up again when you think the worst is over. When you turn off the chiming from your smartphone or simply tell your digital assistant you’re awake. All these products are probably manufactured by companies that are publicly traded. These companies rake in sales and many become so ubiquitous in our society that the founder and CEO’s have become household names. Elon Musk, Bill Gates, Steve Jobs, Meg Whitman, Jeff Bezos, Warren Buffet to name a few. Phones, computers, apps, the internet, transportation via public/private, air travel, factories, cheap energy, healthcare, etc. all have a meaningful impact on our economy and in turn our markets.
However, there are always things to worry about as an investor. Look at the chart below. Note that in each of the grey areas (recession period) there’s a drop in the market. I also want you to notice how short each of the recessions is, especially when compared to the upswings. Next time you hear someone talking about the risks of investing, remember this chart.
Recessions do mean a slower economy, slower profits and major changes in the dynamics of the stock market for a short period of time.
That also means you must make adjustments in your portfolio, especially if you’re within ten years of retirement. PLEASE CALL US TODAY TO DISCUSS YOUR SITUATION.
But take care not to panic. Recessions are so short-lived (less than two years, often less than one year) and stocks tend to rebound sharply once the dust has settled.
I will say that recessions are generally the result of the Federal Reserve action to deliberately slow the economy and tame inflation. Funny how aggressive the FED has been the past few years in raising the overnight interest rates when we have a trend of historically low inflation. Inflation is too much money chasing too few goods and services. It’s an odd situation that the Fed must derail economic growth because people have too much money and are overpaying for things, but that’s exactly what happens.
It’s great to be skeptical and to ask questions. But following perennial pessimists that make money anyway from newsletters, or analysis in ivory towers will leave you broke. I get emails and calls all the time saying something like, “Hey are you finally getting bearish? You’re too optimistic.” Adversity and market fluctuations are real and make it difficult to manage your investments on your own as too often people are their own worst enemy when it comes to money. Not all stories have a happy ending, but one of the truths about America and Americans is that we believe that we can control our own stories. Optimism is so important and is often the deciding factor on how your reality will turn out.
Blake Parrish, CFP®
Senior VP, Portfolio Manager
Phone: (503) 619-7237
E-mail: blake@bpfinancialassoc.com
Certified Financial Planner Board of Standards Inc. owns the certification marks CFP®, CERTIFIED FINANCIAL PLANNER™, CFP® (with plaque design) and CFP® (with flame design) in the U.S., which it awards to individuals who successfully complete CFP Board’s initial and ongoing certification requirements.”