Dear valued client,
When will markets recover? The truth is, nobody knows for sure. Nobody can predict the future. We can, however, look to the past to see how markets have weathered turbulent economic conditions before.
Since 1950, the market has dropped more than 15% a total of 17 times. On 11 of those occasions, the market did not bottom out until central banks began signaling a loosening of monetary policy (decrease interest rates). With the way inflation has been raging over the past months, the Federal Reserve will likely continue to raise interest rates (tightening monetary policy) in the coming months.
There are several factors currently weighing the market down. An alleviation in any of them could have a significantly positive impact on its direction.
In energy news, Europe is re-opening coal-fired power plants because, as it currently stands, there will not be enough natural gas come wintertime. Germany was the first country to take this step toward preserving whatever amount of natural gas they have left. Climate concerns are taking a back seat as priorities have shifted to forgoing Russian oil. Politicians are aware that inflation, especially in the energy sector, has been hurting people’s wallets and will no doubt be a decisive factor in upcoming elections around the world.
I’d like to share a few interesting passages from Morgan Housel’s The Psychology of Money:
“Modern capitalism is a pro at two things: generating wealth and generating envy. Perhaps they go hand in hand; wanting to surpass your peers can be the fuel of hard work. But life isn’t any fun without a sense of enough. Happiness, as it’s said, is just results minus expectations.”
“A good definition of an investing genius is the man or woman who can do the average thing when all those around them are going crazy.”
“Money’s greatest intrinsic value – and this can’t be overstated – is its ability to give you control over your time.”
“Personal savings and frugality – finance’s conservation and efficiency – are parts of the money equation that are more in your control and have a 100% chance of being as effective in the future as they are today.”
“When you define savings as the gap between your ego and your income you realize why many people with decent incomes save so little. It’s a daily struggle against instincts to extend your peacock feathers to their outermost limits to keep up with others doing the same.”
If you would like to sit down sometime this summer to review your portfolio and discuss your investments moving forward, please let me know.
Have a terrific weekend,
PW
