We had a great dinner at OX Restaurant on June 1st with a wonderful group of clients in attendance. Our presentation was about investing with TenBridge and a look at time spent in the market and standby truths when it comes to investing. But the economy and the potential impact of investments were top of everyone’s minds, and for good reason.
To the link between the economy and the markets:
Often, we see these things as inextricably linked when they are not. They influence each other, no doubt. But many times, the market often leads the economy and a good market, like we are in, normally means a good short-term economy close on the heels. Matter of fact, in the decade of the Great Depression, 1933, 1934, 1935, 1936, and 1938 were all positive performers in the Dow Jones Industrial Average index. In 1933, the stock market was up over 66%, in 1935 it was up over 38%, and in both 1936 and 1938 it was up over 20%. As we all know, this was during the worst economic calamity in modern history.
But in tandem with this, during the Great Depression bond returns soared to new highs with average annualized returns of over 6%. Other things like consumer staples (think Kellogg’s), tobacco, and public utilities, also did well during the depression.
Then in 2000 when the bubble burst most people were hyper focused on the Nasdaq and large technology stocks which were in a free fall, but most people don’t realize small cap stocks posted positive returns in 2 of those three years.
But this is not to minimize the long-term threats to our economy, like the widening wealth gap, high inflation, political divides, and reckless public sector government spending. These all represent a real threat to the long-term health of our country, and the effects will not be evenly felt across our communities. This, however, is a separate and distinct conversation, one of which can occupy volumes of time and emotion. One we are having daily with our friends, co-workers, and family. And you know me, I’m deeply involved in our local community and trying to influence positive changes. I could talk about it all day, but our responsibility to you is not solving the economy or political landscape, it is to help you in all things financial. We are, after all, your personal CFO.
For those of you who are near or at retirement, you have relatively conservative portfolios and on balance have as many bonds as stocks, and of those stocks about half is international. So, in a TenBridge near retiree or retiree portfolio, they are exposed to US stocks to the tune of about 15% – 25%. So, to you my answer is, even in the face of potential economic hardship, your investments are positioned to minimize the potential threats. Not eliminate them but simply minimize them as best we can. If the US stock market corrects, which eventually it will, you are only exposed to about 15 – 25% of that correction.
For those of you who are in more aggressive portfolios, market corrections and upheaval are a time of opportunity. A time when we run into the burning building to seize that opportunity and come out the other side better off. So, to you, my answer is, be prepared. If the market has a big correction, double down on your retirement plan contributions, save more money in your investment accounts, and be ready to buy stocks even as they fall. It is hard and painful, but the market is on sale and those with the readiness to embrace it can come out better than when they went in.
We can’t see the future, and we share your frustration with how things are going nationally, and on the local level. But we like to keep our eyes on the ball, and that ball is you and your goals.
We all have different goals but achieving them is universally important. We are always your partner in doing so.
About TenBridge Partners
TenBridge Partners is an independent financial planning and investment management firm based in Portland, Oregon with a simple focus of honoring the fiduciary responsibility of putting clients first. Guiding with curiosity and trusted expertise, we empower people to live their unique story with financial clarity and confidence.
Planning is central to everything we do. Our focus is on a complete understanding of your needs through the financial planning process, putting your success at the heart of our work.
We strive to create a community where financial planning feels fun, dynamic, and human.
From the desk of
Erik Lawrence CFP®
The information contained in this correspondence is intended for general educational purposes only and as a means for facilitating a conversation. Please consider our door always open to discuss your particular situation and how this information might benefit you and fit your specific needs.