How to handle market declines
Unless you have a crystal ball, you might find the latest economic outlook a bit puzzling. Our data from all the economists show conflicting opinions, which is confusing. What we do know is that the economy is always changing, and usually trending in one direction or another. As financial advisors, we try to anticipate those trends, or at least respond quickly to them.
The COVID-19 pandemic was a unique situation for all of us. The last society-changing pandemic was in 1918. Everyone in business from that time has passed on, so there are no mentors to consult. Technology has also rapidly progressed, so the ground rules, whatever they were, have changed too.
What we do know is that COVID-19 created a worldwide recession which is mirrored in the United States. Or is it? Supply chain problems and restrictions on travel resulted in a huge increase in inflation and Gross Domestic Product in the U.S. declined for two quarters in a row. These are classic indicators of economic recession.
At the same time, we are seeing incredibly low unemployment rates, a lot of hiring, rising wages, and a very tight labor market. Which, really, are not indicators of a recession.
If you click here, you can find an article from Capital Group about handling market declines (and uncertainty!). A lot of it you have heard from all of us over and over again, but it’s a reminder than downturns don’t last forever, and volatility is an inevitable part of investing.
Keep an eye out for our quarterly market outlook from Capital Investments in April. In the meantime, if you have any questions, please feel free to call us any time.