At the time of this writing it is snowing outside, the equity markets have had (to be kind) a volatile start to the year, and I am still stuck inside my house or sentenced to mask wearing when I leave (yes, I got all my shots). Add to this a significant rise in crime, inflation which I told you last August was going to be nasty and not transitory unless there was a change in policy direction, and a plethora of inept policy proposals that are not helping to relieve the supply shortages of almost everything, and you might find yourself less than thrilled about the future. However, history and the numbers might argue with you.
America Always Corrects Mistakes and Thrives
Let’s face it, we have had a lot of difficult times in the past. Typically, the average person (who by the way is the one who makes the country go) will tell us when they have had enough and it is time to change course. One example is the recent Monmouth University poll which shows that 70% of Americans agree that we just need to accept that Covid is here to stay and we just need to get on with our lives. It is sad what Covid has done for many reasons; but I am certainly one of the 70% who are ready to move on.
There are definitely differences in the populace today (probably the term ‘snowflake’ was not one used in 1941), and in the world economic order due to the rise of China and our dependence thereon for supplies. However, I am hopeful.
The Recent Market Movement Must Be Viewed with Historical Perspective
In the final session before Christmas, the S&P hit another record close at about 4,725. The DJIA hit about 36,585 on January 3rd. The Nasdaq (tech stocks) record was about 16,057. These were followed by a lousy January for the equity markets. As of the close today these are now at 4,546 and 35,405 and 14,346, respectively. Although Nasdaq has been hit hard this year, none of these closes is the catastrophe that we are reading about in some articles. They are down about 3.8%, 3.2%, and 10.7%, respectively year to date. Certainly, these are not unheard of either, as the average stock move downward during any year is about 14%. I don’t like to see a down market either, but I also am not going to panic when the market does what it has done for years. Fortunately, I believe that our clients are positioned well according to their personal situations.
The key to changing the overall direction for the markets is not a simple solution, but instead will involve the Fed carefully reducing its bond purchases and increasing interest rates slowly and in a way that is somewhat predictable for the markets, no more over-spending (I know, relatively speaking) in Washington, and some very basic reversals of certain policies to end energy dependence and get inflation under control and our supply issues addressed. It’s not brain surgery; but it takes a commitment to pursuing a solution.
If you have questions on how the current economy is affecting your financial plan, or just want to have an annual review of your plan progress, let’s set up a meeting this tax season. We’re here to help guide you.