Is the Sky Really Falling (again)?Insights Timely
Just a quick note to offer some perspective on the (many) headlines floating around.
There are almost too many things to be worried about right now, so I’d like to pause for a second to remember the abundance in our lives.
Especially when so many folks are suffering.
When the world stresses me out, I remind myself to be grateful for what I have.
What's your go-to for uncertain times? Hit “reply” and let me know.
Ok, let's dive in.
(Not in the mood for economic stuff? Scroll down to the P.S. for a mental snack.)
Are we in a bear market?
In some sectors, yes, stocks have dropped more than 20% from their last peak, which is the technical definition of a bear market.1
So, we're in bear territory, at least.
But, as of this writing, the broader S&P 500 has not entered a bear market. It might, of course.
That’s absolutely possible in this environment.
So, let’s remember that we’re not day traders.
We’re long-term investors, and the day-to-day and week-to-week gyrations aren’t as important as what happens over years.
Here’s a quick chart showing just how common big market drops are:2
Is another financial crisis imminent?
The professional economists who study these things don't think so.
Russia's economy is definitely in trouble and the country may default on its debt repayments. While that's not good news for the banks and institutions that are owed money, the debts are not enough to put the whole financial system at risk.3
That’s really hard to say with so many unknowns.
Currently, economists don’t think a U.S. recession is likely, but the risk is definitely on the horizon.6
Inflationary pressures, consumer expectations, and funky interest rate patterns (called an inverted yield curve) could be flashing warning signs.
Does that mean a recession is certain? Definitely not.
Is it a risk worth watching? Absolutely. So we will.
There’s a lot of uncertainty swirling. So, forecasts and predictions are not very accurate or useful.
Instead, we focus on the very few things that are within our control: our strategies, our reactions, and our compassion for ourselves and others.
That was a lot of information to process. Do you have any questions or concerns? Hit “reply” and let me know.
I’ll be in touch with updates as I have them.
Sending peaceful thoughts.
P.S. A mental snack: A lot of us think creativity is something only certain people are born with. Turns out, researchers say creative thinking can be trained by teaching yourself to imagine radically different possibilities and perspectives. Kind of how writers and artists create fictional worlds and stories.
Why is this important? I think there's a lot of existential anxiety floating around our changing world. Training ourselves to think creatively and be open to possibility is (in my humble opinion) a great way to fight anxiety and embrace uncertainty. What do you think?
1 - https://www.bloomberg.com/news/articles/2022-03-15/list-of-bear-markets-grows-as-global-stocks-erase-12-trillion
2 - https://am.jpmorgan.com/content/dam/jpm-am-aem/global/en/insights/market-insights/guide-to-the-markets/mi-guide-to-the-markets-us.pdf
3 - https://www.cnbc.com/2022/03/14/as-russia-nears-a-debt-default-talk-now-turns-to-global-contagion.html
4 - https://www.wsj.com/articles/ukraine-war-oil-gas-prices-inflation-federal-reserve-11647268257?mod=hp_lead_pos5 Wall Street Journal - The Inflation Hits Just Keep Coming, Raising Stakes for the Fed
5 - https://www.marketwatch.com/story/unprecedented-territory-stocks-slump-on-russia-ukraine-war-as-jittery-investors-watch-for-fed-to-start-hiking-rates-amid-high-market-volatility-11647091326
6 - https://www.ft.com/content/d8e60667-0379-4323-9b74-dbbf5a043e38 Financial Times - A US Recession is on the Table
Risk Disclosure: Investing involves risk including the potential loss of principal. No investment strategy can guarantee a profit or protect against loss in periods of declining values. Past performance does not guarantee future results.
This material is for information purposes only and is not intended as an offer or solicitation with respect to the purchase or sale of any security. The content is developed from sources believed to be providing accurate information; no warranty, expressed or implied, is made regarding accuracy, adequacy, completeness, legality, reliability or usefulness of any information. Consult your financial professional before making any investment decision. For illustrative use only.
The S&P 500 is an unmanaged composite index considered to be representative of the U.S. stock market in general. All index returns exclude reinvested dividends and interest. Past performance is no guarantee of future results. Indices are unmanaged and cannot be invested into directly.