The Stock Market is not the Economy
Enjoy this week's edition of the Planner's Beta
Beta (n) - climber's jargon that designates information about a climb This digest's purpose is to share observations, ideas, and treasures found this week which you may also find insightful. Sharing does not mean it's an endorsement. I am endorsing the pursuit of knowledge and exploration.
Something about Investing
The stock market is not the economy. Don't rely on headlines for an all-clear to invest: A case study of the Global Financial Crisis.
Falling markets and drastic headlines can tempt individuals to abandon their long-term investing plans. Their thinking might go something like, let's wait until it's over, hoping to catch the market at its lowest point before buying in. Or in rising markets, maybe they seek to sell most of their holdings near the peak. However, timing the market is virtually an impossible task, as the chart below illustrates. It's good to remember:
Headlines shouldn't dictate when you invest; they may not reflect what's happening in the market.
Recovery typically involves many episodes of gains and losses that can obscure an overall upward trend.
Just a few trading days can be responsible for the most significant gains during a recovery; being out of the market can mean missing out on the most profitable periods.
See the notes and references for this chart below.
It's understandable to have concerns about market volatility and its effect on your portfolio. As we can see from this case study, volatility is likely to continue. The situation in the markets is certainly different this time. However, so far, it follows a pattern we've seen many times before. By all means, if you have questions or concerns about your situation, please get in touch. I am here to help you navigate your financial goals in light of the risks and constraints you face.
How an unprecedented gift built a legacy of conservation in South America (The National Geographic) - Kris and Doug Tompkins, two successful executives from the clothing industry, purchased large swaths of land in Chile and Argentina starting in the 1990s. Locals were skeptical of the gringos' ambitions. They feared the couple was going to steal the land and water for themselves. What ultimately happened is impressive. The duo donated the property to the people of the countries to serve as national parks. Now, with vast stretches of land under protection, Kris continues to grow her and her deceased husband's legacy by re-wilding the areas. They are introducing back native species. these lands have not seen in decades. Their story is truly inspiring, and this article from National Geographic illustrates the challenges and rewards they faced.
Something About Financial Planning
Federal Reserve scraps transfer limits on bank savings accounts (Reuters) - Typically, savings accounts have a monthly transfer limit of six times per month. Given the current economic crisis, the central bank is now allowing banks to remove these restrictions, making it easier for money to flow through the economy. This rule, likely to be temporary, will allow those who have an emergency fund in a savings account, more convenient access to those monies.
Something About Economics
Secrets of Lockdown Lifestyle Laid Bare in Electricity Data (Bloomberg) - We are staying up later and sleeping in more. Data from energy providers show the use of electricity shifted in the day. We are watching more TV later into the night, and starting the morning brew later in the morning. What is more interesting is to see how the total consumption of electricity changes as the economy opens up. I imagine economists, policymakers, and investors will look to this data to understand the recovery and the implications of what more or less energy consumption means.
Notes and references to A case study of the Global Financial Crisis: Past performance is no guarantee of future returns. The performance of an index is not an exact representation of any particular investment, as you cannot invest directly in an index. Please remember that all investments involve some risk. Be aware that fluctuations in the financial markets and other factors may cause declines in the value of your account. There is no guarantee that any particular asset allocation or mix of funds will meet your investment objectives or provide you with a given level of income. Andrews, Edmund L., 2009. Fed Plans to Inject Another $1 Trillion to Aid the Economy. The New York Times (March 18). Accessed March 24, 2020, at https://www.nytimes. com/2009/03/19/business/economy/19fed.html. Goodman, Peter S., 2009. Jobs Report Highlights Shaky U.S. Recovery. The New York Times (October 2). Accessed March 24, 2020, at https://www.nytimes.com/2009/10/03/business/ economy/03jobs.html. Goodman, Peter S. and Jack Healy, 2009. 663,000 Jobs Lost in March; Total Tops 5 Million. The New York Times (April 3). Accessed March 24, 2020, at https://www.nytimes. com/2009/04/04/business/economy/04jobs.html. Lazo, Alejandro, 2010. U.S. home foreclosures reach record high in second quarter. Los Angeles Times (July 15). Accessed March 24, 2020, at https://www.latimes.com/archives/ la-xpm-2010-jul-15-la-fi-foreclosures-20100715-story.html. Lobb, Annelena, 2009. Dow 5,000? There’s a Case for It. The Wall Street Journal (March 9). Accessed March 24, 2020, at https://www.wsj.com/articles/SB123654810850564723. Luhby, Tami, 2010. Fannie to U.S.: We need another $15.3 billion. CNN Money (February 26,). Accessed March 24, 2020, at https://money.cnn.com/2010/02/26/news/companies/ Fannie_mae_results. Milmo, Dan, 2011. US economy and international stock markets start year with optimism. The Guardian (January 3). Accessed March 24, 2020, at https://www.theguardian.com/ business/2011/jan/04/us-economy-buoys-international-markets.
Have something on your mind? Schedule a free call with Nate.
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