As we approach the summer months, there has been a barrage of negative economic news: persistent inflation, high oil prices, negative business and consumer sentiment. These macroeconomic issues have pushed markets into negative territory for 2022.
We completely understand and empathize with the visceral reaction you may have upon seeing portfolio balances decline. However, part of being a disciplined investor is ignoring headlines and focusing on your long-term goals as well as economic and company fundamentals. While there is no doubt that more economic headwinds exist now than 6 months ago, we remain focused on generating long-term value from high quality investments. History shows that the U.S. stock market has always recovered. Although the experience of protracted losses can be hard to bear, the disciplined investor has always been rewarded. Below is a graphic from The New York Times depicting the infrequency of bear markets and their duration:
There is some good economic news as well. Unemployment is near a 50-year low and the economy has regained most of the jobs lost during the lockdowns. Consumers, who contribute about 70% to the total production of the U.S., continue to spend. Housing remains strong despite increasing mortgage rates. As the Federal Reserve increases interest rates in order to combat inflation, we may continue to see market volatility. If successful, these efforts will result in lower inflation and a healthier economy. I'd like to leave you with this quote I came upon recently -
“The stock market is the only store that when there’s a sale, everybody runs out.”