Dustin Hall |
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October is now behind us and it has delivered on its track record as a historically favorable month for stocks, offering some respite for investors as major equity indices rose for the month. The downside pressure on equities had gotten a bit overdone after investor pessimism during September reached lows not witnessed in quite a few years. From a contrarian perspective, extreme pessimism can often be followed by a market bounce. Such a reaction can...
Dustin Hall |
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So far, 2022 looks like it will go down in the history books as one of the worst years for stocks, bonds, and 60/40 portfolios ever. With nowhere to hide (except possibly in commodities), it is no wonder that people may feel despondent, at the very least. Yet, history tells us that staying invested is often the most rewarding course during periods of market turmoil. Let's review four points to keep in mind when talking about turbulent markets.
Dustin Hall |
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First, we want to acknowledge the tremendous damage and displacement caused by Hurricane Ian. Our thoughts are with those impacted by this devastating storm. This has clearly been a challenging year for households. Stocks and bonds are both down significantly. Elevated food and gas prices continue to stretch budgets, and higher interest rates have increased borrowing costs. But we continue to see signs that the worst may be behind us. Gas prices are falling. Inflation pressures stemming from supply chain disruptions are easing. And the Federal Reserve (Fed) has taken these price increases seriously and is doing its job by raising short-term interest rates. While the Fed may still gradually increase rates throughout this year, it has already done a lot even as asset prices have come under increasing pressure.
When it comes to stock market performance, August was “the best of times, and the worst of times.” The strong market rally that peaked in mid-August was viewed by many analysts as a transition from a bear to bull market, based on the surge in breadth that stocks enjoyed and the magnitude of the two-month rally that began in mid-June totaling 17%.
Dustin Hall |
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With inflation continuing to grow, the Federal Reserve’s battle against it isn’t ending anytime soon. Higher interest rates make it harder for families and businesses to borrow money. Balancing inflation and interest rates is a complex issue and has a big influence on your wallet.
Markets rarely give us clear skies, and there are always threats to watch for on the horizon, but the right preparation, context, and support can help us navigate anything that may lie ahead. So far, this year hasn’t seen a full-blown crisis like 2008–2009 or 2020, but the ride has been very bumpy. We may not be flying into a storm, but there’s been plenty of turbulence the first part of 2022. How businesses, households, and central banks steer through the rough air will set the tone for markets over the second half of 2022.
Under the influence of romance, it is easy to be distracted from practicalities. But couples that can’t agree on how to spend and save tend not to last very long. To maintain a healthy relationship, it’s important to address these problems early on.