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Roots of Wealth is proudly managed by Crimmins Wealth Management Located in Ramsey, NJ.
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It feels like everything is down this year! What’s going on and what do I do?

July 20, 2022 by Dan Crimmins Leave a Comment

I have been getting this type of question lately….

It feels like everything is down this year! What’s going on and what do I do?

It’s rare to see a quarter where both stocks and bonds are down at the same time. From March 1979 – March 2022 only 8% of quarters have experienced negative returns from both US Stocks and US Bonds (14/173 quarters).[1] Periods like we’re seeing today are not unprecedented, but they can be uncomfortable.

It’s normal to be nervous, but you don’t have to be scared. By accepting that uncertainty is part of investing and planning for these times, you can avoid unnecessary anxiety. If investing were a definite slam dunk without ambiguity, there might not be a reward. For an investment to do better than a money-market fund, it needs to carry risk.

Information about risk and returns are being incorporated into market prices constantly. If you read an article about what XYZ news means for ABC company, it’s likely that the information has already been incorporated into the price by other buyers and sellers.

History shows us that markets have rewarded long-term investors. Think all the way back to March 2020. The S&P 500 Index declined 33.79% from the previous high as the pandemic worsened.[2] Even if investors were able to time getting out of the market, they were probably unable to correctly time getting back in. As more information became available, the S&P 500 Index jumped 17.57% from its March 23 low in just three trading sessions. Investors who fled to cash to try to time the market may have lost significantly.

The Fed has also been getting attention recently as it increased rates and is looking to do so again to combat inflation. On average, US equity market returns are reliably positive in months with increases in target rates.[3] Similarly within bond markets, periods of rising rates do not necessarily result in negative returns.

Have A Wealth Management Question? Click Here To Ask Dan

While the future is uncertain and headlines scream do something, remember lessons learned. A financial advisor integrates your unique needs into a plan that you can stick with in good times and bad. There are things that matter and things we can control; focusing on the overlap between the two can lead to a better investment experience.

But ponder this: As Jonathan Clements founder and editor of Humble Dollar recently wrote

“If you’d been less sensible with your money, your results could have been far, far worse. In particular, take a bow if you:

  • Didn’t buy cryptocurrencies. Bitcoin has plummeted 53% this year—and that’s better than many other cryptocurrencies.
  • Didn’t invest in special purpose acquisition companies, otherwise known as SPACs. For instance, De-SPAC ETF has slumped 63% in 2022, Defiance Next Gen SPAC Derived ETF is off 36% and Morgan Creek Exos SPAC Originated ETF is down 33%.
  • Didn’t give up on international diversification. No, international stocks haven’t been big winners this year. But they’ve held up slightly better than the broad U.S. stock market, as evidenced by Vanguard FTSE All-World ex-U.S. ETF, which is down 18%, its performance helped by emerging markets. Indeed, Vanguard FTSE Emerging Markets ETF is off 15% this year, better than both the broad U.S. stock market and developed foreign markets.
  • Didn’t give up on value. Maybe your portfolio has a tilt toward value stocks, which have been one of this year’s most resilient stock market sectors, with Vanguard Value ETF sliding just 8%. Maybe you simply stuck with your total market index fund, resisting the urge to load up on growth stocks. Yes, Vanguard Total Stock Market ETF has lost 19% in 2022. But Vanguard Growth ETF has tumbled 27%.
  • Didn’t reach for yield. Vanguard Long-Term Treasury ETF is down 22% this year, Vanguard Long-Term Corporate Bond ETF has also fallen 22% and Vanguard Emerging Markets Government Bond ETF has slid 20%.

Lost “just” 11% on your bonds and 19% on your stocks? Cheer up. This year, that gets you bragging rights at the neighborhood barbecue.”

Hope you have a great week!

If you know of anyone that you think would appreciate this email, please don’t hesitate to forward it on.

[1] US Stocks: Russell 3000 Index. US Bonds: Bloomberg U.S. Aggregate Bond Index.
[2] S&P data © 2021 S&P Dow Jones Indices LLC, a division of S&P Global. All rights reserved. Indices are not available for direct investment.
[3] The Federal Open Market Committee (FOMC) holds eight regularly scheduled meetings per year and may not change the target rate at every meeting. The FOMC may also change the target rate multiple times within the same month.

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The foregoing content reflects the opinions of Crimmins Wealth Management and is subject to change at any time without notice. Content provided herein is for informational purposes only and should not be used or construed as investment advice or a recommendation regarding the purchase or sale of any security. There is no guarantee that the statements, opinions or forecasts provided herein will prove to be correct. Past performance may not be indicative of future results. All investing involves risk, including the potential for loss of principal. There is no guarantee that any investment plan or strategy will be successful.

About Dan Crimmins

Dan Crimmins, co-founder of Crimmins Wealth Management, is a financial coach and fee only financial planner. Have a financial question? ASK DAN

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