Quarterly Client Letter: July 2024
Does the current investment climate feel “busier” than usual?
Feeling overwhelmed by the current investment buzz? You’re not alone. It’s an election year in the U.S., so there’s the usual mix of dramatic rhetoric and high-stakes drama. Globally, things are just as intense, with almost half the world heading to the polls amidst ongoing conflicts in the Middle East and Eastern Europe. Inflation is still hitting us where it hurts, and economic policymakers are trying to navigate uncharted territory. Every headline and pundit seem to be warning that one wrong move could skyrocket inflation or tank the economy. Enter fear.
On top of that, you might have felt a bit of FOMO (fear of missing out) lately. Nvidia and other AI stocks shot up through most of the second quarter. Gold surged about 22% from its six-month low to its six-month high as of June 30. Meme stocks like GameStop and AMC even made a comeback in the headlines.
Fear and FOMO might seem like opposites, but both can seriously mess with your success as an investor. That’s why, as we move into the second half of another action-packed year, it’s the perfect time to revisit some timeless lessons about long-term investing and remind you why we build your portfolios the way we do.
In a word, it’s all about freedom.
Financial consultant Dan Richards nails it when he says, “What really drives markets at their extremes are the twin emotions of greed on the upside and fear on the downside. Both can be costly—and it takes real discipline and resolve to withstand the forces of those emotions as the pendulum moves through its arc.”
So, how do you find that kind of discipline and resolve? History is a great guide. The returns and risks of different types of assets over time form the backbone of all solid investment plans. These historical results cover periods of intense difficulty (World War II, 1970s stagflation, the Great Recession, COVID) and times of great prosperity (the Roaring ’20s, the post-WWII recovery, the 1990s tech boom).
Your globally diversified portfolio is built for these times—for all times—tailored to your goals, time horizon, and risk tolerance. It’s designed to free you from both fear and FOMO.
This year, it’s especially useful to remember that election outcomes historically haven’t had much impact on your long-term investment results. Research by Fidelity shows that the S&P 500 has produced very similar returns under both Democratic and Republican presidents, no matter which party dominates Congress. Even individual sectors don’t seem to care much whether the White House is blue or red: Since 1976, every single sector has outperformed in years Republicans won and in years Democrats won. And every sector has under-performed in both parties' victory years too. So, the next time you hear that one candidate is good or bad for energy, tech, healthcare, or financials, take it with a grain of salt.
Keeping a long-term perspective rooted in history can be incredibly freeing. As you read, watch, or listen to the news, notice when you start to feel fear or FOMO—and then remind yourself that your plan has you covered.
With that, we wish you a happy summer. If you have any questions or concerns, reach out and let us know how we can help.
The opinions voiced are for general information only and are not intended to provide specific advice or recommendations for any individual. All performance referenced is historical and is no guarantee of future results. All indices are unmanaged and may not be invested into directly.
There is no guarantee that a diversified portfolio will enhance overall returns or outperform a non-diversified portfolio. Diversification does not protect against market risk. show less