By Billy Peterson and Cade Peterson
There’s no denying we are living in a crazy world. With so much uncertainty and stress going around, many people are starting to realize and deal with unintended side effects of the policies mandated in response to the virus outbreak. With nearly all media outlets and reckless journalists fanning the flames, factors such as domestic abuse, suicide, depression, and behavioral issues such as hate crimes, property destruction, and rioting have all skyrocketed. Coincidence? We don’t believe so. Questions we are currently being asked by our clients are: “Is the virus and the policy response going to get even more restrictive?” “How will the election affect my portfolio?” Are the riots going to discourage business owners from operating and will they also dampen consumer spending?” “What about inflation?” If you have asked yourself any of these questions, you’re not alone. Here is some reassurance that staying invested is likely the right move.
First, we’ve seen how quickly the market recovered from the drop in March and April. We saw to the Dow’s worst single-day in U.S market history on March 9. It fell 2,013.76 points to 23,851.02. Do you remember how you felt that day? Probably not great. Ultimately, the Dow bottomed at 18,591 on March 23. Now 5 months later, the Dow is closing in on 28,000 points and climbing. Even with the fear daily negative headlines pumped out by the media, the market still climbed back, much faster and stronger than expected. Another wave of COVID-19 is unlikely to have a drastic or damaging effect on the market. We are reading the market constantly and continuously analyzing trends, strengths and possible short-term head winds.
Second, elections are not a reason to lose faith in American businesses. Granted the current environment is more politically charged than we have ever witnessed. One thing we can say about elections is that the markets are resilient. Regardless of if President Trump retains his presidency or if Joe Biden takes control, companies will adjust. We’ve seen this uncertainty and fear with previous elections and witnessed companies thrive through it all. Adapting to new environments is what makes good companies great. Elections happen every 4 years, congressional elections every 2 years. This isn’t a surprise. No matter what the outcome, your portfolio is built for the long haul. We are preparing for any adjustments we might need to make going into the election.
We have considered and are still considering a commodity allocation to some portfolios, such as oil & gas and precious metals as a possible hedge against rising inflation. Inflation leads to a weakening of the dollars you currently own. Investing in assets that stay ahead of inflation rates will be crucial to maintaining purchasing power. With the repeated stimulus packages and money supply increasing dramatically, we believe inflation is an issue to be monitored. This newly printed money will have to be paid back by sooner or later by us tax payers and ultimately withdrawn from the economic circulation in some way by the Federal Reserve. Sadly, our society has become numb to borrowing and the consequences it brings. People want more, more, more, yet they want to give less, less, less. The politicians play right along, unwilling to stand for fiscal responsibility in the way our country was founded. Instead, they think nothing of the $26 Trillion debt load which climbs higher by the day. Does no one else see this as the most important issue to our nation’s future? We should all start demanding that our elected officials start taking steps to reverse this trend. None of us would want to see our household debt levels explode like this. We would want debts to be trending lower, allowing our net worth to grow. In this light, we are looking ahead and preparing for whatever the future may hold.
Think back to January 2020. Did anyone honestly believe that a viral outbreak could cause such widespread turmoil and economic destruction? We have witnessed and are living through unprecedented times. Yet markets climb the wall of worry. Jumping overboard is sometimes seen as the best solution in times of extreme panic. Once out of the boat however, it is very difficult to pull yourself back in. The moral of this story is to limit your exposure to media. Consider honestly how watching, reading and listening to fear mongering makes you feel. Patience is an absolute requirement to be a successful long-term investor. Yet the media heads promote nothing of the sort. They promote stress, anxiety, action. If you find yourself watching Cramer on CNBC or any other show encouraging wild trading, please change the channel for your own well-being.
Just to serve as a reminder, the best days are almost always followed by the worst. If you were to miss just the 10 best days from 1980 through 2018 then your total gain would be 48% less than the person who simply stayed in the boat. Crazy right? These are definitely bizarre times we are living through today. Not only trusting the process, but trusting in God as well is always calming throughout stressful situations.
Democratic Presidents Saw Higher Stock Market Returns Compared to Republican Presidents S&P 500 Index annual real total return, %
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Any opinions are those of the author and not necessarily those of Raymond James. There is no guarantee that these statements, opinions or forecasts provided herein will prove to be correct. Investing involves risk and you may incur a profit or loss regardless of strategy selected. The S&P 500 is an unmanaged index of 500 widely held stocks that is generally considered representative of the U.S. stock market. Keep in mind that individuals cannot invest directly in any index, and index performance does not include transaction costs or other fees, which will affect actual investment performance. Individual investor’s results will vary. Past performance does not guarantee future results.