Please Note:  Speak to your tax, legal or financial advisor for specific advice about your particular plans and situation.

Your Money & Your Emotions

Earlier this year, stocks in the US were expensive.  But the economy was doing well and even an overpriced stock market left many thinking “any potential downturn in the stock markets should be modest.”  

So we remained optimistic, even excited about the future.

Then COVID-19 found it’s way to the US and the world.  Skipping euphoria, we went straight to anxiety.

It won’t affect us. Our denial stage?

Costco anyone? More than concerned, we were fearful.

Uh oh, we’re in over our head.  A whiff of desperation.

“Shut the place down” (and sell your stocks?) – Panic, capitulation, despondence and depression – all compressed into March.

But even as we entered April and the news was bad, there was some hope.

The food supply appeared stable, “mayhem” was (mostly) non-existent and we felt some relief that this likely wouldn’t last forever.

Now science appears to be making ground and there are many reasons to think optimistically.

With the image as our guide, optimism is physically shown as the halfway point in the emotional market cycle.  We’re probably not 1/2 through the next market cycle as they usually last 7-10 years but, ideally, you are prepared for optimistism before everyone else is optimistic.

Don’t be the last one to reach optimism.  Or it will cost you dearly in retirement.

Image credit:  Raymond James Research.

Please Note:  Speak to your tax, legal or financial advisor for specific advice about your particular plans and situation.

I am impressed people are able to write and talk so much.  

I am unimpressed with the applicability of their “insight”.

The COVID-19 pandemic appears to be past its peak in many areas,  some investment markets have recovered significantly and the news has simply become less bad.

Yet over the last few weeks I’ve struggled with what to write as the pandemic has unfolded.  Various projections have proven to be wrong, both the pessimistic and the optimistic.  And everyone appears to be speculating as to what will happen next and/or how things should happen.

The medical news is starting to mirror stock market and economic pundits.  Since everyone is taking their best guess, I didn’t think it helpful to offer you yet another “guess”.  So I didn’t.  And I won’t.

And, as you likely have, I have recently read and watched the news more than I normally do.

What did I learn?

I am impressed people are able to write and talk so much.  

I am unimpressed with the applicability of their “insight”. 

So I won’t add to the noise but instead share a few actionable items that are important to you no matter where you stand on your path to retirement.

If you are in “accumulation” mode and a distance from retirement your (hopefully!) suitably aggressive portfolio has likely seen significant volatility.  Adding to your investments or even rearranging what you own might make sense when things are “on-sale” and that the post COVID-19 world will likely feel and actually be different than the past. Rearranging what you own is an oversimplification, of course, but while the markets have recovered significantly, much of that recovery has been driven by few stocks.  So opportunities remain if you can focus on the future.

If you are in accumulation but within 10 years of retirement… you may want to temporarily delay the transition of assets from your growth focused portfolio to an income & growth focused portfolio.   You should also read the next section below.

If you are retired or currently transitioning into retirement (next 2 years) your plan and income stream should already be designed to weather this downturn. If you don’t have a Retirement Income Plan, click here or on the image below to view  “The Retirement Income Process” post.

If you want to see how The Retirement Income Process can work for you, contact me directly at 860-661-3821, John.Bubello@Compass-Retirement.com or set a time in my calendar for a brief call here.

Please Note:  Speak to your tax, legal or financial advisor for specific advice about your particular plans and situation.

The markets are forward looking.  You should be too.

What’s Baked In?

Unfortunately, the US medical system appears unprepared for a pandemic.

So we made a choice.  And while we have collectively chosen the health of our fellow citizens over the health of the US economy, we are being punished for it. In shutting down the US economy (alongside the rest of the world), we are creating financial uncertainty on a personal, national and global scale.

As the global stock and bond markets are forward looking (leading indicators), they are attempting to “price in” the approximate economic damage being caused by our collective “hunkering down”. From an investment perspective, markets will continue to “reprice” based on a number of factors as market levels are the collective “best guess” of all participants…well in advance of the actual facts being known.

The investment markets price based on known and all anticipated information.

The good news: The financial crisis of 2008-2009 has given the US Treasury Department and Federal Reserve much of the experience and toolkit needed to keep markets functioning reasonably well.  Somewhat behind the scenes but vital.

Where Do We Stand?

1. The initial market drop appears “in”.   Mostly based on the fear (and likely reality) of future bad economic data.  Big drop = a lot of bad news is priced in. The “markets” non-reaction to the largest jobless claims in history today supports this.

2. The government has supported the markets with liquidity.  And a stimulus package is on the way… it appears. Clearly the market looks upon this favorably but is likely pricing it in.  Please don’t fail us Congress.

3. Then it’s time for data, data and more data.  Weekly jobless claims, consumer spending, national economic reports, inflation, sentiment, etc, etc…  The markets will continue to reprice up (or down) if it thinks the unemployment news is better than (or, possibly, worse than) expected.

4. History tells us the markets/our investments will improve before the news does.

For now (if you have a good plan), we just need the news to be better than anticipated.

Additional reading/resources:

Dimensional Funds – US Equity Returns Following Sharp Downturns

From the NY Times – Can I Boost My Immune System

Economics from Vanguard – A sharp contraction, then an upswing

Please Note:  Speak to your tax, legal or financial advisor for specific advice about your particular plans and situation.