Bear Bones

As markets open today with the S&P500 down over 20% from its January all-time, investor sentiment appears to be declining.  However, context is important for perspective, so I wanted to share my forward-looking thoughts.

As inflation continues to run hot, it appears more difficult for the Fed to orchestrate a soft landing in the economy.  However, in my view, it is not the time to sound the alarm. Despite the pain of this year’s market declines, we should remain forward-looking and opportunistic, and I have previously posted that at these levels, we cannot be as bearish about the future of market returns today as some commentators were earlier in the year.  Simply put, these markets may have priced in a recession and given us valuation discounts.  Periodic 20% market declines are not uncommon, and history indicates they have been long-term buying opportunities.

From a portfolio perspective, our philosophy has been that when markets reach a 20% decline, we consider rebalancing into the decline and buying equities for clients with the appropriate risk profile and time horizon.  Markets could be closer to the market bottom than the peak but could certainly decline further, which could warrant a tactical pause until economic data and sentiment improve. 

Most importantly, we advocate staying consistent with your planning process: your financial plan and your investment plan.  Our process starts with risk management: short-term volatility is considered, and your overall plan can stay on course. I am more concerned about the headlines of your life than of the news.