In Case of Panic Break Glass

Proverbs 21:5

The plans of the diligent lead surely to abundance,
but everyone who is hasty comes only to poverty.

So far in 2023, we’ve already been put through an interesting roller coaster ride, to say the least.  After the experience investors had in 2022, 2023 hasn’t provided much relief for those who are feeling anxious about where the markets are heading.  While we’ve seen signs of inflation cooling off, the Federal Reserve has continued to raise interest rates.  Some are placing the blame on the Fed for recent bank failures.  Not far behind those thoughts are the concerns of a slowing economy and the talk of a pending recession.  Keeping the proper perspective can help us to fight through the desire of making reactionary decisions and can bring us back to why we have a plan in the first place.  The following are some key points to review:

1. Will we go into a recession?

Depending on the media outlet you listen to or watch, the warnings of a pending recession have been going out since early 2022.  Some say that we’ve been in one, others say that there’s one coming.  What do I say?  Maybe we will, maybe we won’t.  The truth of the matter is it doesn’t really matter.  Historically speaking, Recessions are hard to predict.  We can’t predict when they will happen or how long they will last.  We also can’t really predict how the markets will respond to a recession.  The official announcement of a recession is usually done after its already happened and after the markets have already reacted.  The bottom line, we don’t know how things will react and so we shouldn’t make financial decisions based on whether or not we might be moving into a recession.

2. What about increasing interest rates?

Longer-Term interest rates have gone up a lot over the past year plus.  Interest rates like the stock market, look to the future.  The Federal Reserve has forecasted only one more rate increase for the remainder of the year and some analysts are forecasting a rate cut later this year.  Even if the Fed does continue to raise rates, that doesn’t necessarily mean that long-term rates will continue to rise. Also, the bond market may have already priced in further increases.  The reality is, Monetary Policy is tightening and this may force the U.S. into a recession or maybe not.  Either way, it doesn’t matter since it can’t be predicted.  

3. My Investments are down.  What should I do?

This is where we go back to investing versus speculating.  Its important to remember that we own high quality companies.  We’re not investing in random three or four letter ticker symbols and how much their price will move in the near-term.  We’re invested in the companies that those ticker symbols represent.  The current value of your account only show how people feel about these investments at that point in time.  The broad market is more of a mood barometer and not a very reliable measure of the actual long-term value of the investments you own.  The daily ups and downs of account values do not represent the quality of your investments or their future potential.

4. What if the stock market goes down more?

I actually had an a professional in another line of work tell me to hold off on investing a mutual clients assets because he heard that the market was going to go down another 10% or more.  This was in December of last 2022.  The S&P 500 was up over 5% for the month of January and has held just under that since. While yes, it is possible that the market could go back down and even move lower substantially but if that were to happen we’d want to see what opportunities we’ll have to add more to high quality investments at that lower price.  Investing 101: Sell high, Buy low!  This may also give you the chance to put more towards your employer sponsored retirement plan.  (We can help with that if you did know) This process may seem painful in the short term but history has shown that investors who stick to their plan and take advantage of pull back in the market tend to be rewarded in the long term.

If you like to know more about how we can help you with your 401k, check out our article title “5 Ways A Financial Advisor Can Help You Manage Your 401k” by clicking the link below.

OneAscent Financial Services, LLC (“OAFS”), d/b/a Provident Oak Financial, is a registered investment adviser with the United States Securities and Exchange Commission. OAFS does not make any representations or warranties as to the accuracy, timeliness, suitability, completeness, or relevance of any information prepared by OAFS or any unaffiliated third party. OAFS is neither an attorney nor accountant, and no portion of the presented content should be interpreted as legal, accounting, or tax advice. All such information is provided solely for convenience purposes only and all users thereof should be guided accordingly.