PATIENCE IS REQUIRED | CROUCH CONNECTION| APRIL 15th, 2022 "ADV"
PATIENCE IS REQUIRED
Investing can sometimes be frustrating and, so far, 2022 has tried the patience of many of us. I was recently reminded of a quote from Warren Buffett, who always seems to capture an idea in a memorable quip that says it all. He said:
“The stock market is a device for transferring money from the impatient to the patient.”
In other words, quick, emotional decisions about investments typically are wrong and patience usually rewards those who invest conservatively and ride out the turbulent times like this.
SEPARATE HEADLINES FROM REALITY
When we are traversing these trying times, I attempt to separate the headlines from the factors that actually affect the value of our investments. Sometimes there are some surprising differences. Let’s look at some of the disturbing headlines you are currently seeing:
· Russian invasion of Ukraine. There is no way to sugar-coat the disturbing images we see of the suffering in the Ukraine. The atrocities are horrible and all of us want to see them stopped. But from an investing point of view, regional wars rarely have a long-term impact on the stock market. According to the Raymond James Equity Research team, the closest comparable conflicts would be the 1962 Cuban Missile Crisis which caused a 3-month 22% decline in the S&P 500 followed by a quick recovery to new highs within 12 months or the 1990 Gulf War, which saw a 20% 3-month market decline followed by a recovery to new highs 4 months later.
· Inflation. While inflation is all around us, from housing prices to gasoline and food, indications so far are that most public companies have been able to pass along the inflation they are seeing in labor, raw materials and transportation in higher prices to consumers. Again, according to RJ Research, American households still have significantly more net wealth than prior to the pandemic, and they are spending that wealth, supporting the earnings of the companies represented in the stock market.
· Tighter Federal Reserve Policy. While the comments from the members of the FOMC have turned unquestionably hawkish in the past couple of weeks and markets have reacted negatively to those comments, what the Fed members say sometimes doesn’t correspond to what they ultimately do. Neel Kashkari, President of the Minneapolis Fed, recently stated:
“We know that monetary policy operates with a lag, but forward guidance can have an immediate effect.”
So if they can “talk down” inflation, they might not have to ultimately raise interest rates. Apparently, they are hoping their recent hawkish comments will help them avoid action that could derail the economy.
You can add other headlines to that list. No matter which side of the political spectrum you support, it seems everyone believes that America as we know it is going to fall apart if the opposing party wins the election…Republicans when Obama was elected…Democrats when Trump was elected. Again, the feared outcome didn’t materialize.
2022 OUTLOOK STILL CAUTIOUSLY OPTIMISTIC
At this point, the Raymond James Research team is still saying that “despite the headwinds, we feel the bull market can be sustained.” The healthy consumer should support positive earnings for American companies.
As of April 6, the market has recovered 10.1% of the 14.6% drop we registered on February 24th from the market high on January 4th. Patience has always paid off at times like this. We believe your patience with this market will pay off again. Call us if we can help with your concerns.
Dave Crouch Kim Blackburn Kay O’Connell
Registered Principal Branch Operations Manager Financial Advisor
The information contained in this report does not purport to be a complete description of the securities, markets, or developments referred to in this material nor is it a recommendation. The information has been obtained from sources considered to be reliable, but we do not guarantee that the foregoing material is accurate or complete. Any opinions are those of Dave Crouch and not necessarily those of Raymond James. Expressions of opinion are as of this date and are subject to change without notice. There is no guarantee that these statements, opinions or forecasts provided herein will prove to be correct. Investing involves risk and you may incur a profit or loss regardless of strategy selected. Past performance does not guarantee future results. Future investment performance cannot be guaranteed, investment yields will fluctuate with market conditions.