January 29, 2024

The past few years have had their share of financial uncertainty, from inflation to rising interest rates to volatile stock and bond markets. Headlines added to the stress, from the growth of artificial intelligence to the collapse of Silicon Valley Bank (and others) to the threat of government shutdowns. Let’s also add the geopolitical crises from Ukraine to the Middle East.

Despite the gloomy (and depressing) headlines, global stocks returned 22% in 2023, defying early recession predictions from most prominent economists. Bond prices signaled optimism as inflation cooled over the course of the year. There was a near complete recovery from a very difficult 2022 stock and bond markets.

Markets do a good job of processing information and incorporating it into the prices of stocks and bonds. Markets run on human ingenuity. Throughout history, there have been people and businesses working endlessly to make the world better. Solving problems generates profits and profits lead to market returns. Attempting to time the market or finding the next hot stock is a losing proposition unless you know something before everyone else.

When it comes to investing during difficult times, we will always turn to our investment philosophy. We can’t control the ups and downs of the market. We can control the following in the investment process:

• Appropriate Asset Allocation (stock/bond/cash mix)
• Global diversification (US & International exposure)
• Low-cost investment, low turnover (buying/selling)
• Tax-efficiency (present & future tax bracket awareness)
• Asset location (Taxable, tax deferred, tax exempt)
• Adequate cash savings & emergency reserves

It’s also important to tune out the noise. We are bombarded by the media and water cooler talk about the hottest stock, new trend or doomsday scenarios. Turn all of this off. Harness the power of compounding and a disciplined long-term strategy. Focus on your goals. Think in terms of decades not days in the investment process.