WRITTEN BY LEE STOERZINGER, CFP (R)
In the hundreds of meetings we have with our clients each year, the questions that come up most often are related to what we think the markets will do, what’s going on in the economy, how that affects their investments, etc. They often seem driven by current events, politics, and perceptions built upon recent information. This led me to develop some commentary that addresses these things directly, but maybe in a way that is different than you expect.
First, the easy stuff. Regarding the economy and markets, we work with money managers and economic experts all over the world. Based on our research and experience, we believe that while there are some shifts occurring around the globe, they are more cause for changing how we think about investing rather than cause for worry. These changes happen and are part of economic cycles. Some examples of this are significant declines in stock buybacks and continued government interventions when it would first appear none is needed. For more than a decade, U.S. stock markets have provided much of the returns and many investors have abandoned their long-term strategies. In fact, we are just finishing an unbelievable year for the U.S. markets. Defying much of the herd, we think we have entered a new period where globally diversified risk managed portfolios will provide more opportunity. Part of the reason is simply based on changing trends and the other is that we will need a deeper box of tools to deal with the future economic environment and lower return expectations for stocks.
With all that said, we believe there is something missing from the above questions, as well as the commentary. Sticking to external factors, there are several things which concern us as we move through time. First, the sheer amount of information we are all taking in and how we receive it seems to be changing how we view history and make decisions. Second, we seem to have entered a cycle where societal tensions are on the rise. We believe this will increase significantly and that we are still in the early stages. Finally, the wealth gap between those at the bottom and top of our society is staggering and has only been this way several times throughout world history. Previous journeys tell us this cannot continue indefinitely. These items may not seem like they are directly related to our meetings, financial planning, or specific market returns. However, they are whirlwinds operating in the backdrop of our society and are making it more difficult to define what we value, and what we want our present moments to look like. And by the way, they all create uncertainty. Markets don’t like uncertainty. We ignore them at our own peril.
We are a wealth management firm that helps our clients gain a greater understanding of how money works in their lives. Investing for returns is only part of the picture. Building solid plans based on goals, managing through life events and creating legacies is often where the real work is done. Wrapped in that is often behavioral finance and processing the external world as money is often as emotional as anything. Therefore, we like to provide commentary like this, as it’s not only what is going on out there, but often how we react to it that matters.
When I think about the state of our world, I am reminded of the old Charles Dickens book, “A Tale of Two Cities.” It was the best of times.... Well, you know the rest.
This content is developed from sources believed to be providing accurate information. The information in this material is not intended as tax or legal advice. It may not be used for the purpose of avoiding any federal tax penalties. Please consult legal or tax professionals for specific information regarding your individual situation. The opinions expressed and material provided are for general information, and should not be considered a solicitation for the purchase or sale of any security.