Summer is here! I hope you are enjoying the warmer weather (a little too warm, maybe), and the continued lifting of many covid related restrictions. Coming out of the impact of the economic shut-down, the economy and most markets are also reflecting a generally positive outlook for growth and recovery. There are always concerns in the investment realm including inflation; increased government debt, market corrections, volatility, etc., but with strong fundamentals which include double-digit earnings expectations in the coming quarter, improved consumer sentiment, and continued favorable monetary and policy support, there are very good arguments to be made for staying invested in 2021 and beyond.
One of the resources I have relied on for many years is a quarterly report produced by JP Morgan Asset Management. Their “Guide to the Markets” is a massive collection of facts and figures summarizing nearly everything investment related over the past quarter. (I’ve included the entire 86-page report that provides financial advisors a way to “geek-out” on the numbers like no other publication does!)
I’m also providing links to a few charts that address a few hot topics that I often field questions about.
The biggest debates in the investment arena for the last couple of months involve inflation. Is it transitory, will the seemingly endless government money printing finally trigger the high rates that many have predicted since the ’08 and ’09 bailouts? The charts I’ve provided don’t address these questions but instead provide a different perspective that you might find surprising. During inflationary scenarios going back to 1988, most investment sectors achieved positive returns. This realization should alleviate concerns about how negative inflationary influences actually are on investments, whether they are transitory or permanent.
This is one of my favorite charts that I use in new client presentations to explain sound investment principals. The graph clearly shows that risk is greatly reduced when diversification is applied, and the time horizon lengthened. It is a visual of the old investment adage that it’s not about “timing” the market, but “time in” the market.
This graph is included to remind and prepare you for the likelihood of increased volatility and market corrections. On average, a market correction of 14.3% is experienced annually dating back to 1980. Bull markets also tend to experience increased volatility after approximately 16 to 18 months, which is right about where we find ourselves. A pullback of -4% in ’21 is the largest we’ve experienced thus far. If you’ve invested long enough, you’ve seen that the more significant pullbacks have provided great entry points for long-term growth. I always keep some powder dry in short-term; more conservative positions for the very purpose of attempting to buy during dips in the market.
This information is for the parents and grandparents out there. And, by the way, I’m slated to move into the grandparent class this October!!
I’ve taped this chart to our refrigerator a few times over the years to help motivate my kids to stay on a path towards a college degree. Even as traditional college and its value is increasingly questioned, the numbers clearly show that significantly higher incomes and employment opportunities still exist for those with college and advanced degrees.
I hope you find this information beneficial! Please let me know if you have any question or would like to schedule a meeting to discuss your situation.
Hope you had a wonderful 4th!
Jack Schniepp, CFP