As we manage your investments and guide you through this election year, it's important to remember the value of staying committed to long-term investment strategies despite the inevitable noise generated by political headlines. Attached is a short SEI Presentation that I found very interesting and thought worth sharing about market cycles through past election years. There are a few themes to remember:
Last month stock markets experienced a mini crash, accompanied by dire headlines and prominent Wall Street experts calling for emergency Fed rate cuts. After a long period of serenity in the markets, we experienced a few strong down days. In addition, the VIX, which is a measure of volatility, spiked above 60.1 The last time the VIX spiked so much was during the Global Financial Crisis and COVID. Was this that bad? Of course not. There were “reasons” for the move, but none of them were good or lasting. The main reason for the drawdown and spike in volatility was that investors overreacted. Within a few days of this mini crash, the markets experienced a strong recovery. It took less than two weeks for the markets to recover. It was as if the mini crash never happened.
At the beginning of the summer, we experienced a global Microsoft Windows outage, which took many businesses offline. This is a great reminder of how sensitive computing and cloud technology can be. You would think that something that prevented people from corresponding via email and incapacitated Delta Airlines for days would be a malicious virus. But that was not the case. This was simply a CrowdStrike software update containing an incorrect code. Something so simple did so much damage!
As we prepare for basketball’s march madness tournament, it is a good time to reflect on how maddening the stock market can be. What causes the madness of the markets? Many things, but one of the greatest frustrations to investors is the significant fluctuations in asset prices. These fluctuations, also known as volatility, are driven primarily by dire and urgent headlines, spurious market and economic forecasts, and our own emotions. But such volatility is normal!
Nick Saban, recently retired football coach of the Alabama Crimson Tide said, “If you want to be good you don’t really have a lot of choices.” He was referring to the choice to either be disciplined or not to a specific process that would lead to success. No one is born an athlete. We are all human with similar preferences: sleep/rest over working out, eating the donut rather than broccoli, and having fun instead of working.
Have you ever wondered how to apply March Madness to your financial well-being? There may be parallels between your bracket selection and investing.
This blog will explain why some people choose to retire early and the pros and cons of that decision.
This blog will share insights into how inflation is calculated to help readers understand this sometimes vague metric.
Self-control is an important characteristic to develop that can help us in all aspects of our lives from biting our tongue, to passing on the sweet treat, to accomplishing our New Year’s resolutions, to avoiding alarming financial market news alerts. But it isn’t easy! In fact, it can be downright painful, especially when trying to control some urge.
The brain may be filled with gray matter, but it hates gray areas. And there are few other places we find gray areas (uncertainty) than in the economies and markets of the world. One word of caution: our innate desire for certainty leaves us prone to fall for the illusion of certainty. Market and economic forecasts often provide an illusion of certainty.