Stocks seem to be caught in a volatile pattern as Q1 earnings season heats up. Something surprising could trigger a big move, but it’s hard to predict anything with certainty.
A potentially bigger concern: A number of economists think that a recession may be on the horizon.1
The latest forecast by the International Monetary Fund predicts that Russia’s invasion of Ukraine is going to take a chunk out of global growth this year and next.2 Fannie Mae is forecasting slowing growth in 2022 and a recession in 2023.3 When multiple forecasts start pointing in the same general direction, it’s worth paying attention. So, what do we do with that information right now?
Do we panic and freak out? Bail on our investment strategies to head off losses?
Nope. We wait and see. We sharpen our tools. We look for opportunities. It’s natural to get uneasy when markets get dicey, but knee-jerk reactions can be costly. An old proverb of disputed origin says: “Predictions are difficult, especially about the future.”
Forecasts are usually wrong in at least one way, and relying too much on what “might” happen is a recipe for mistakes.
So we keep our eyes open, our wits about us, and live our lives as we usually would. A recession (or bear market) is not inevitable, so we shouldn’t act as though it is. I want to share an important note I read from David Bahnsen’s Monday Economic Recap Newsletter. David mentions the following market facts, which I thought sheds light on a few of the market undertones which many don’t fully appreciate.
- I do understand it’s pretty hard to talk about “how well” the market is doing when things seem to be getting hammered, but can I just share a couple data points with you that are really quite stunning? What would you have guessed the market would be down if I had told you the “shiny object” space (so-called tech innovation, SPACs, and the like) would be down -60%, that the largest social media company on the planet would be down over -50%, the largest streaming company -69%, the largest e-commerce company on the planet down -23%, the largest software/operating system company down -20%, and even the largest electric car company down -18%? I am guessing you would not have guessed the S&P 500 would be down just -6.8% (equal-weighted). How has the carnage in one aspect of the market been so benign to broader markets, especially when equal-weighted versus cap-weighted? Because Large Cap Value is down just -3.6% through this carnage.~David L. Bahnsen, Chief Investment Officer, Managing Partner at The Bahnsen Group.
If the above statistics don’t scream the importance of diversification, nothing will ever make a better case.
Bottom line: I’m watching and digesting the analysis as it comes in, and I’ll be in touch with recommendations as needed. In the meantime, our managed portfolios have been rebalanced and we continue to diversify between both value and growth.
Have questions or concerns? Reach out. That’s why I’m here.
Now, I have a big-picture question for you.
Where do you find beauty in the world around you?
This is not an idle question, by the way. Humans are driven to want more, whatever we have already accomplished. That’s not a bad thing, but having the ability to take a step back and appreciate what’s in front of us right now is powerful. Especially in an uncertain world. It puts us in the driver’s seat of our wants and trains our brain not to go into worry mode. For my retirees out there and you know who you are, when I say you need to slow down, take a trip, and enjoy your hard earned savings. I mean it. If you don’t enjoy the fruits of your hard labor and sacrifices, your heirs surely will and won’t think twice about it.
The search for beauty is why we go to the beach. It’s why we go to the mountains. It’s the cold beverage of choice on a quiet lake, sharing the boat with grandpa, dads, sons and daughters. It’s why we listen to music and look at art. We’re looking for something to take us out of the everyday and show us something deeper. Appreciate your life, live in the moment. Beauty doesn’t need to be big and spectacular. It’s hidden in plain sight around us, waiting to be encountered. It’s in the joy of a child. A dog zooming around the yard. A small act of kindness at the grocery store. Knowing how to find beauty in the mundane is a powerful tonic to uncertainty and worry.
Where have you found it lately?
in search of beauty,
Jeremy Ftacek
