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Staying The Course Pays Off.

Staying The Course Pays Off.

August 03, 2023

By now, we’re all about as desensitized to recession talk as to the prophecies of a doomsday cult. And we may be right: On 08/02/23, Bank of America’s economists became the first at a major Wall Street Bank to reverse their earlier prediction, saying the US won’t have a recession in the next year.

Less than a year ago, just about everyone was forecasting an imminent recession. The Bloomberg Economics probability model suggested there was a 100% chance the US would be plunged into a recession in the next year. And back in June 2022, JPMorgan CEO Jamie Dimon told investors to brace for an impending economic “hurricane.”

But times have changed: BofA pointed to solid consumer spending and inflation cooling to 3% last month. And its economists noted that, despite the Fed’s string of interest rate hikes, the labor market has remained strong, with unemployment rates staying low (just 3.6% in June) and companies slowly hiring.

It’s not just BofA seeing clear skies ahead

Even as it raised interest rates again last week, the Federal Reserve said that it expects a recession-free 2023. And Goldman Sachs cut its estimation of the odds of a recession in the next year from 25% to 20%.

CEOs in Q2 earnings calls were also feeling hopeful. The phrase "soft landing," the term for the Fed managing to tackle inflation without tanking the economy, has been mentioned during earnings calls 97% more this cycle than in the last one.

  • Execs’ comments ranged from PNC CEO Bill Demchak’s “I think the soft landing feels right” to Tesla CEO Elon Musk’s “I don’t know what the hell was going on.”
  • Even JPMorgan’s Dimon refrained from natural disaster metaphors and instead said the US consumer was currently in good shape. 

My Clients. Over the past 12 months, I’ve received a few calls from clients, expressing their concerns about the economy. Their concerns were based on what they heard from the “talking heads” or supposed “experts” on the news and TV, and asked my opinion on what they should do with their investments. My answer has been consistent – although I don’t have a crystal ball to see into the future, I’ve continued to recommend “stay the course”.

No one can predict the future, what the markets will (or won’t) do today, tomorrow, or next year. Historically, when markets drop in value, they have rebounded higher than where they were. And for those who stayed calm and didn’t panic, they reaped the benefits.

Warren Buffet once said: “Be fearful when others are greedy, and greedy when others are fearful.” And Greg Davis, Vanguard CIO said: “Tune out the noise and stay the course.” Definitely words of wisdom.

In my experience, investors who stay the course tend to avoid the cost of reinvesting in the market, which can lock in losses.

What next? Investing can be scary. No doubt about it. But that’s why you have me as your financial professional – to guide you through times like these, answer your questions, talk you off the edge (when necessary), and help you determine if what you’re in in right for you. This is why we discuss your risk tolerance levels, your short-term goals, your long term goals.

This is why I recommend we have review sessions, at least annually, to make sure you’re comfortable with your current program and make any tweaks to it if necessary. This is why I recommend we complete a MoneyEdge plan for you – to provide us with a blueprint to make sure you’re on the right track for your goals and objectives.

If you haven’t scheduled a review session with me recently, let’s make it happen. Click here to access my calendar and let’s set a date and time for a phone or web review.

I look forward to speaking with you soon!