If you’re anything like us, you probably woke up baffled that we are already several weeks into 2024 and in the throes of tax season. Time can have a way of creeping past you when the news flow and weekly schedule moves at a breakneck pace. Add on top of that the volatility in stock and bond markets – especially since the pandemic. 

Not that anyone wants to reminisce about COVID, but there is reason to go backwards to understand where we are right now.  So, let’s take a moment to reflect on this time period and volatility to prepare ourselves as we embark on the journey of closing out our chaotic post-COVID chapter (higher rates, higher inflation) and focus on stabilization.

The COVID-19 Effect

Remember back in 2020 when COVID-19 hit the scene like a wrecking ball, crashing through every corner of our lives, including the stock market? (Reminder #1:  That was a 34% slide on the S&P 500 in a matter of weeks)  It was a wild time, to say the least. The unwelcome guest leveled the global economy and left chaos in its wake. The impact of the pandemic on interest rates and inflation has been nothing short of seismic, reshaping the financial landscape in ways we never imagined.

There was an unprecedented volatility prompting some to frantically shuffle their portfolios, while others shuffled across the thin ice and rode it out. It was like trying to navigate a ship through a stormy sea with no compass or map.  

Perhaps the most significant impact has been on inflation. As economies ground to a halt and supply chains were disrupted, the main weapons to combat the financial stress with stimulus and ultra-low interest rates.  Between supply chain issues and the firehose of stimulus (Reminder #2: The Government threw over $6 TRILLION of stimulus at the pandemic) inflation soared to levels unseen in decades. Prices skyrocketed, the economy adjusted (maybe permanently) and we avoided what could have been a financial calamity.

Let’s not forget all the business with crypto and how every one of your neighbor’s brother’s aunt’s second cousin was the expert in NFT’s, day-trading, and short-term stocks overnight – adding to the volatility!

There is a laundry list of reasons behind every tip, trip, and flip since the pandemic crossed our doorstep – but let’s move on and touch on one of the most crucial elements that often goes overlooked.

The Emotional Journey of Investing

Have you ever wondered why something so linear and analytical as the stock market has always been as fickle as a toddler who’s always changing their mind—you never quite know what they’re going to do next and oftentimes it makes no logical sense?

Enter the emotional element of the stock market. Oh boy, emotions…

They can turn even the most rational investor into a nervous wreck driving them to contemplate many a questionable investment decision. There’s no doubt that this phenomenon has played a pivotal role in what we’ve seen happen over the last few years. Panic, stress, fear, worry – you name it – was at an all-time high and almost everyone lost their grounding. 

What happens here is life goes from being a stabilized system with next steps clearly defined, to a teenage girl’s hairstyle full of reactionary and cautionary tales. It’s easy to get caught up in the day-to-day drama of the market, checking our portfolios with the same frequency as she’s checking her Instagram likes. But here’s the thing: daily fluctuations can mess with our heads and take our eyes of the the prize.  The prize being…the goal!  The “WHY” around the purpose of investing in the first place…be it retirement, college savings or overall financial security.

Here’s Reminder #3:  We invest our money to seek higher rates of return than cash (over the long term) so our money grows faster than inflation does! 

That’s why it’s crucial to take a step back and avoid the temptation to log in daily. High volatility can distort our perception of the market, leading us to make impulsive decisions that we may later regret (looking at you, Perm). 

The Importance of Having a Plan

This leads ever so fluently into our next focus: planning and sticking to that plan. We all know that chaos can be thrilling and blinding to the stress it creates. We moan and groan over the ups and downs of life, and in our moments of clarity we proclaim that simplicity is key-  but let’s face it, we’re still human. Sometimes we can’t help but to be drawn to the whirlwind like Dorothy to a twister when the opportunity presents itself.

That’s why it’s crucial to think of a flexible and dynamic financial plan as your atlas and almanac, guiding you through the twists and turns of the market with confidence and grace. Sure, it might not be as exciting as storm chasing, but trust us, slow and steady will win the race.

Focus on your specific long-term goals and exercise patience. In a world where instant gratification is the name of the game, it can be tempting to seek out quick wins and fast cash. But investing isn’t a sprint—it’s a marathon. So take a deep breath, relax, and remember that good things come to those who wait.

What potential could you unlock if you shifted your focus to “getting rich slow”?

So, What’s Next

As we gaze with apprehensive hope onto 2024 and beyond, can we anticipate a leveling out of the wild fluctuations we’ve grown accustomed to?

It’s clear that COVID-19 has left an indelible mark on risk taking, interest rates and inflation. But amidst the uncertainty, there have also been lessons learned and opportunities for growth that give us the tools we need to take back a little bit of control. We may not be able to predict the future, but we can certainly learn from history.

While we’ve seen a multi-year stretch of rising inflation and interest rates, there’s evidence a leveling out.  Global economies continue to recover and stabilize from inflation shocks.  Higher rates also have a benefit and have led to an increased set of investment options for investors (Final Reminder #4: Don’t forget “Income Investing”).  Of course, there will still be bumps along the way, but such is the nature of the beast. The key is to map out your goals & plans, stay vigilant, and adapt to the changing landscape.

Looking to the future, let’s remember to approach investing with caution, resilience, and a healthy dose of optimism.  We acknowledge it is an emotional endeavor and investing is rarely predictable.  With the right mindset, we just may come out on top.

This material was created for educational and informational purposes only and is not intended as ERISA, tax, legal or investment advice.

If you are seeking investment advice specific to your needs, such advice services must be obtained on your own separate from this educational material. 

All performance referenced is historical and is no guarantee of future results. 

To determine which strategies or investments may be suitable for you, consult the appropriate qualified professional prior to making a decision. 

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