Q4 2021 Quarterly Newsletter
Dear Clients,
This past quarter was relatively calm, until the last few weeks when a laundry list of risks that have been building for some time seemed to catch up with the market. Rising inflation, turbulence in the Treasury markets, China’s tech crackdown, the Fed’s tapering of bond purchases and the resurgence of COVID-19 via the Delta variant have all contributed to uncertainty for investors as of late. Surprisingly, though, the global markets are up big over the past year (US stocks are up 31.88%, International Developed stocks are up 26.50% and Emerging Markets stocks are up 18.20%). I’m struck by this complacency, and it reminds me of an analogy I’ve used before. The global stock market over the past year has acted like an escalator…picking up investors and smoothly transporting them to higher returns. Historically speaking, however, the stock market is more like an erratic elevator…picking up investors and taking them on a wild ride with some occasional gut-wrenching drops on the way to eventual higher returns.
So…what is an investor to do?
If our clients have heard this once they’ve heard it a thousand times... you can’t time the markets, so don’t try. When you click ‘sell’ there’s someone on the other side clicking ‘buy,’ and chances are they have more information than you.
Guard yourself against what you read. Financial journalists will periodically stock investor’s anxiety. A 2012 WSJ headline reads ‘Stocks Head Back to Earth,’ suggesting sky-high valuations and a coming correction. Our wealth thanks us for staying invested over the past 9 years.
Understand your investment time horizon and build a portfolio to match the long-term risks you face.
Use realistic future expected stock returns in your retirement projections. Remember that high current returns mean lower future expected returns. Expectations must be based on reality.
For those in retirement, utilize a dynamic, rules-based withdrawal strategy to maximize portfolio distributions while protecting your portfolio when (not “if”) the markets decline.
Focus on what my favorite financial author, William Bernstein, calls ‘The Four Horsemen of Risk’ – Inflation, Deflation, Confiscation and Devastation…other risks are relatively temporary.
I’m confident that by pursuing wealth building in a prudent and intentional manner we investors can withstand the ups and downs of the markets and benefit from the long-term growth the world economy has to offer. When you have questions related to the market, your investments and how your long-term plan may be affected by them, please reach out.
Thank you for your continued trust and business.
-Andy