Timely Thoughts from Evan and Dale
“What’s the market going to do?” “Why is it going down?” “What is making money?’ “Its up 500 points, should we be buying?” “Its down, should we be selling?”
All of these are legitimate questions we have always received but recently the questions have turned more aggressively rhetorical with some clients.
Dale and I have been working with clients for over 25 years. Never in those 25 years have we experienced the rapid back and forth on a minute by minute, hour by hour and day by day basis. For many months now we have seen the markets and almost every sector within these markets sell off. We have had days where we start down 1-5% only to turn around for no reason, or the inverse. We have had days where everything looks great and we rally, only to give it all back within minutes or the next day. It is never enjoyable to lose wealth, even if it is temporary or if its giving back some gains. The toll this volatility is taking on our clients, our team and ourselves is reaching unprecedented levels. Some days it feels like we are capitulating, a term that references when most people are throwing in the towel and selling anything not nailed down. Other days, people are buying with both fists everything regardless of what we tell them. In a world where bonds, stocks and alternatives are all down double digits, its tough to find a more stable place to go.
What I want to reiterate to everyone is that nobody can be perfect in this business. Nobody has all the answers all the time. Including the talking heads on TV, your family, friends, or coworkers. Everyone likes to talk about their winners but not their losers. Absolutely no one knows where or when the bottom is, or the top. Anyone who thinks they or their adviser can be is fooling themselves. What we do know is that over the last 25 years, our team has developed, refined and gone back to the drawing board to create investment strategies that attempt to mitigate downside risk as much as possible, while allowing a client to reap rewards when the markets allow for that to happen. They are not going to be perfect. The markets will go up 70-80% of the time and pull back 20-30% of the time. One of our primary goals is to mitigate the impact of market crashes to client portfolios. (defined as declines 20% or greater in the S&P 500 lasting at least one year) which are imminent but not permanent or unmanageable. The last three crashes were -57% in 2007-2009, -49% 2000-2002, and -27% in 1980-1982.* We utilize a disciplined process combining fundamental, tactical and hedges to help further this mitigation goal but that is often not enough to sidestep common but painful pullbacks (defined as 15% or greater declines in the S&P 500). In light of the recent market deterioration, we have been revisiting our asset allocations and tactically favoring cash alternatives. If we knew where the markets would go before they went there, we would have clients positioned that way. Or we would be off somewhere sipping umbrella drinks out of a golden shoe. None of which is happening. We can’t promise much except that we and the entire CrossleyShear team are working our tails off for you.
We are going through a period of rising interest rates that have been in the wings for the last decade but on hold for a litany of reasons. We have seen a 12 year bull market with loose money across the globe inflate asset prices and now we are suffering from the hangover of inflation that ultimately comes from asset bubbles. We have had a global pandemic that has taken over 1 million souls in this nation, some very close to us. That same pandemic and the global response to it has also created a massive supply chain disruption, which has exacerbated the inflation we are seeing. Throw the cherry on top with a war in Europe and a continuous, rolling lockdown in China and things just keep getting crazier.
If you are stressed about your account and the market’s volatility, we need you to know we are as well…X 600. One of the things we have always stressed is that we treat our clients’ money, as if it were our own. So please know that we too lose sleep, get sick to our stomach and even get emotional over the gyrations of this market. However just as “hope” isn’t an investment strategy, neither is “fear.” We will continue to manage this environment to the best of our abilities, with the tools of experience, research and non-emotional investment moves. While most of our clients have been supportive and understanding in this chaos, some have been less courteous and we understand your frustration. If you wish to chat, we welcome it, but we ask that you try to be professional, just as you would expect from us and our team.
I the end, we know all of these challenges will pass. The markets will eventually reach new highs, as they always do. We could be headed for more back and forth until…it stops. When it does, we are prepared to succeed for you, our trusted clients because we have processes and time tested strategies in place. We don’t move on fear or hope, we move on facts and math. Hang in there and keep yourselves and your family healthy and all things in perspective.
Evan M. Shear, CERTIFIED FINANCIAL PLANNER™
W. Dale Crossley, JD, Financial Planner