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  • Writer's pictureNate Baim, MBA, CFP®

Why Investors Can Be Thankful After a Volatile Year



Transcript:


In this video, I'll discuss the reasons investors should be thankful this holiday season, despite many of the challenges and uncertainties that markets faced this past year.


I'll cover three charts that are a reminder of how far markets and the economy have come. This is true even though it often feels as if markets are just moving from one crisis to the next. The truth is that, with just a bit of perspective, it's easy to see how positive the current market environment is.


First, this chart shows that most major asset classes have generated not just positive returns this year, but strong ones.


The S&P 500, for instance, has gained over 19% year-to-date with dividends. International developed markets have gained 11.5%, and so on. A diversified portfolio of bonds have only gained about 1%, but this is far better than last year's historic bear market decline.


Overall, a hypothetical portfolio consisting of 60% global stocks and 40% bonds has returned 9% this year, before fees and expenses. Of course, each investor's actual experience will vary depending on their specific circumstances. Still, this is a nice rebound from last year and is an important reason for all investors to be thankful.


An important reason for this strong market performance is that the economy is still healthy. Coming into 2023, many investors and economists expected a recession by the second half of the year. Not only has this not occurred, but unemployment is still near historic lows and GDP growth in the third quarter was one of the strongest in the past two decades.


Inflation also continues to improve significantly. At its peak last year, the Consumer Price Index was as high as 9.1%. Today, it is only 3.2% on a year-over-year basis. Other measures, such as the Producer Price Index, have improved even more.


In many ways, this is the best scenario that economists could have hoped for just a year ago.


So, there are many reasons for investors to be thankful this year, even though it doesn't always feel that way. These are all reminders that it's important to stay invested through all parts of the market cycle.


This chart shows the importance of sticking to an investment and financial plan rather than waiting for the next pullback. Trying to time the market often backfires because markets tend to rise over long periods of time. Waiting for the next pullback often results in missed opportunities, which can last for months or quarters.


I hope you found these insights helpful as we approach the end of the year. Please have a wonderful Thanksgiving and reach out if you would like to discuss any of these topics further. I look forward to speaking with you.





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Nate Baim, MBA CFP(R)
 

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