At a Glance
- 4 Lessons About Life
- 5 Lessons About Markets
Introduction
The most recent inflation data shows that inflation continues to persist near recent highs.1 We are seeing cracks form particularly in the housing markets and goods markets. We expect to see prices flatten or fall in the next 12 months as the Fed continues on its crusade to slay the inflation dragon.
The inflation trend makes it likely that the Federal Reserve will raise interest rates again in November.2 Does that mean a recession is inevitable? Most likely, more on that below. Are we past the bottom or are markets going to fall further? There is probably more to go before we bottom in this cycle. We won't know for sure how things will play out until long after current events are in the rearview mirror. However, the uncertainty won't stop the media from churning out scary headlines and flawed predictions. Instead of speculating wildly about what the future brings, what if we look for lessons and guidelines we can follow?
4 Lessons About Life
- Count your blessings. There is so much in our lives to be grateful for.
- Cherish your most important relationships. They're what truly matters, especially when the road gets rocky.
- When you think of something positive about someone, tell them right away. It might be exactly what they needed to hear today.
- "Experience is what you get when you didn't get what you wanted."3 (Randy Pausch said this. His book, “The Last Lecture” is well worth a read.)
5 Lessons About Markets
- Markets can keep falling for a lot longer than we'd like. Most of you won't remember the bear market of 2020 because it happened over 3 weeks and the recover was just a few months. But those of you who lived through the bear markets of 2000 to 2003 or 2007 to 2009 remember how long and painful bear markets can be.
- Recessions tend to be preceded by interest rate inversions. The 2 year note has been higher than the 10 year note for months. Furthermore, the 3 month note just crossed the 10 year note last week. Notice that before a recession (gray area) the blue line which is the difference between the 10 year note and the 3 month notes dips below zero. We can expect a recession ahead.
- Don't panic and make sudden decisions. One bad decision can destroy years of good ones. If you've prepared for the recession and bear market, then you have no need to fear. Know you have the resources to weather the storm. Its smart to keep enough cash or short term bonds to cover a few years worth of expenses while in retirement.
- Stocks historically deliver strong growth over time. But you only benefit from it if you can withstand the painful periods that come with the territory. Remember that downturns don't last very long compared with years of growth. Volatility is the price to be paid for long term returns.
- You can't avoid all risks. You CAN identify them, manage them, and focus on what's in your control. (That's what I'm here for!)
Here's the bottom line:
Reaping the rewards of long-term investing means taking the good times along with the bad. The end of a bear market comes when an investor never wants to touch bonds, stocks, or real estate again. Bear markets in the different assets classes typically won't end at the same time.
Sean West, Wealth Management Advisor/ CFP®
Disclosure
This blog reflects the personal opinions, viewpoints and analyses of the White Cloud Wealth Management employees providing such comments, and should not be regarded as a description of advisory services provided by White Cloud Wealth Management. The views reflected in the blog are subject to change at any time without notice. Nothing in this material constitutes investment advice, performance data or any recommendation that any particular security, portfolio of securities, transaction or investment strategy is suitable for any specific person. Any mention of a particular security and related performance data is not a recommendation to buy or sell that security.