2022 has been a challenging start for most investors. Stock prices have been down six of the past nine weeks, and the major averages are either in or teetering on correction territory. Bond prices are lower, and yields are higher, which has created an opportunity for some but has resulted in losses for others.
The Federal Reserve recently announced that it would increase short-term interest rates by a quarter of a percentage point for the first time in three years. In addition, they would like to see short-term interest rates near 2% by the year’s end. This aggressive move is aimed to combat inflation, but it’s important to remember that higher rates could slow economic growth this year. Lastly, geopolitical events have added a layer of uncertainty and are one of the main drivers of volatility. 1
Add it all up, and you might be thinking, “what does this all mean for me and my money.” Here’s an overview of my take on the current market environment and some next steps you can take to feel more in control in these volatile times.
Is Volatility Here to Stay?
Short answer? Yes. But here’s why. Growing tensions between Russia and Ukraine have been the most recent driver of the stock market’s aggressive fluctuations. Still, inflation and continued disagreements in our American political environment surrounding foreign energy dependency could cause the volatile market not to subside anytime soon, even if differences abroad get settled.
The Federal Reserve Chair – Jerome Powell, testified at a recent press conference that the Fed wants tighter financial conditions in an attempt to slow the economy in the coming months. Even though he acknowledges that geopolitical events have interjected a large amount of uncertainty into the Fed’s outlook – this will cause volatility to persist in the market meaning the tide is not turning just yet for investors.
I believe it’s best to adopt a mindset that the rest of 2022 is not going to be an easy year, but that’s why we create a personal and unique investment strategy for each investor and, in times of volatility, revisit your risk tolerance so that we can weather the markets.
Staying positive during this time is a lot easier said than done, and it’s important to remember it’s not a matter of if market volatility will occur; it’s a matter of when. Having an investment strategy as part of a holistic financial plan based on your goals, time horizon, and risk tolerance is critical in creating the potential to reach your long-term goals.
As an investment strategist, it’s my job to analyze all economic indicators and provide advice on tactical asset allocation and trading strategies based on the market’s current activity. I want to stress the importance of weathering volatile markets without a proper long-term plan can cause the ups and downs to seem like they are never-ending.
Having a disciplined approach to your financial plan, inclusive of an investment strategy, will help you stay focused on your goals and needs to worry less from week to week and more about what happens over the long term.
If you would like to revisit your feelings toward risk and volatility regarding your investment portfolio, let’s set a time to discuss and review what changes or adaptations, if any, we need to make. The positive side to market fluctuations is opportunity. Stock market corrections are not unusual and represent a normal part of the investing cycle.
If you don’t have a financial plan in place, I encourage you to reach out to our team so that we can work together to create one inclusive of more than an investment strategy but also all areas of your personal finances, so we aren’t missing opportunities to meet your current and future needs.
Please feel free to reach out to me, and I would be happy to speak with you about the market, your investment portfolio and answer any questions you might have.
- Axios.com, March 17, 2022