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The perfect storm and a timely prospect for every investor


So far, 2022 has been an extremely tough year for investors. To recap, as of this writing:

The S&P 500, which tracks the 500 largest US stocks, is down more than 10%

NASDAQ heavy technology

which has provided outstanding performance for more than a decade, is down nearly 18%

The Russell 2000, which represents US small company stocks, is down more than 14%

Listed real estate, which was up around 40% last year, is down more than 5% this year

The European market is down more than 11%

Investment-grade bonds, which typically provide stability within an investor’s portfolio, are down about 9%

Virtually the only bright spot in the markets is commodities, especially energy stocks which are up more than 34% this year. Sounds exciting. However, before you wonder why you don’t own more energy stocks, keep in mind that the energy sector has provided no return excluding inflation for 15 years (2006-2020). This means that, until recently, owning energy stocks for an extended period of time produced no return.

The market turmoil can be attributed to several factors, including:

1) Geopolitical concerns about the Russian-Ukrainian war and its global impact.

2) The highest inflation in over 40 years, including major increases on non-discretionary items like gas and food. It was financially devastating for many Americans.

3) The increase in interest rates by the Federal Reserve in order to control inflation caused the collapse of the market for high quality bonds and will probably lead to a slowdown in the rate of growth in many sectors of the economy.

Now that I’ve painted a grim and dire picture, the question for every investor is obvious: what am I supposed to do now?

The answer is best summed up in just three words, the phrase of the late, legendary Vanguard founder, John C. Bogle: “Stay the course.

Although this short sentence may seem simple, it is far from easy. Telling investors to sit back and do nothing seems counterintuitive. Humans tend to wantpatched”, which is the Yiddish word meaning to deal with or tinker inexpertly with something, including their wallet. Doing something feels right when there is a problem to be solved.

Generally speaking, working harder, training harder, and trying harder are all proven ways to achieve success. Whether it’s sports, school, or climbing the corporate ladder, pushing yourself to be more active usually leads to positive results. However, with investment, doing less is often better. Assuming you have clearly defined goals, an appropriate strategy in place, and an asset allocation that matches that strategy, then doing nothing at all is the optimal approach at this time.

Remember that markets move in cycles. It is a characteristic of the economy and the stock market. It’s not an anomaly. We happen to be in a particularly interesting phase of the cycle right now where investors of all shapes and sizes are feeling the pain. The only certainty in these uncertain times is that this cycle will eventually end and another bull market will follow. When that will happen is anybody’s guess. The key right now is to “stay the course”.

Disclaimer: This article was written by Jonathan Shenkman, Financial Advisor at Oppenheimer & Co. Inc. The information presented here is from sources believed to be reliable and does not purport to be a comprehensive analysis of the market segments discussed. Opinions expressed herein are subject to change without notice. Oppenheimer & Co. Inc. does not provide legal or tax advice. The opinions expressed are not intended to be a prediction of future events, a guarantee of future results and investment advice. Investing in securities is speculative and involves risk. This is not indicative of any particular policy or insurance company. Results will vary based on individual circumstances and current market conditions. All payment guarantees are based on the claims-paying ability of the insurance company. Adtrax#: 4717519.1