The stock market has had a rough first half of the year, with much of the gains from the past two years being lost in 2022. You may have recently heard about the stock market falling into bear market territory, and about concerns the economy could be heading into a recession. Investors are uncertain about what the future holds for the economy and corporate earnings. The consistent stream of bad news from the 24-hour news cycle doesn’t help, making it seem like a reaction is always necessary from you as an investor.
Between rising interest rates, high inflation, supply chain issues, and the war in Ukraine, there are many challenges that companies (and their earnings) are having to adapt to right now. Investors react to these events by seeking to position themselves to profit from these changes, and increased trading activity can impact the prices of stocks. This fluctuation in the price of stocks can create volatility in the market which has the potential to snowball into even more reaction from investors (panic). In a nutshell: short-term market swings are investors reacting to uncertainty.
During times like these, it is important to remind yourself that the businesses you own (and lend your money to) are constantly adapting to changing political and economic environments. Smart people are running these companies, and they are focused on keeping their businesses profitable. They react swiftly to changing situations and make decisions to put their businesses in the best situation to be successful today and in the future. Remember that this is what you are invested in!
With that being said, it’s difficult to watch your account balances fluctuate. This is especially true when you are retired and no longer adding to your retirement pot. Times like this can make you feel like you may run out of money and your spending plan will no longer work. We understand the anxiety that this uncertainty can cause, and we are here to help you through it. The turbulence can be unsettling. It is important to step back from the daily market fluctuations when thinking about your overall plan. We encourage you to revisit your long-term investment plan with your financial advisor, especially if you are feeling uneasy about your financial situation.
It can feel like something has to change to keep your portfolio intact when returns are down, and not doing something may feel counterintuitive. However, this is the easiest way to lose money, more often than not. Viewing your portfolio through a long-term lens is easier said than done, but it is often the best way to avoid making reactionary and emotional investing decisions. We are here to help. Please contact us if you have any questions, comments, feedback, or if you would like to revisit your plan.
This content is provided by Windward Private Wealth Management Inc. (“Windward” or the “Firm”) for informational purposes only. Investing involves the risk of loss and investors should be prepared to bear potential losses. No portion of this blog is to be construed as a solicitation to buy or sell a security or the provision of personalized investment, tax or legal advice. Certain information contained in the individual blog posts will be derived from sources that Windward believes to be reliable; however, the Firm does not guarantee the accuracy or timeliness of such information and assumes no liability for any resulting damages.
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