Quarterly Client Newsletter: 2024 Q2

July 2024

Does the current investment climate feel “busier” than usual?

In the U.S., it’s an election year, with the usual election rhetoric and high-stakes alarmism across the board. Elsewhere, global economic orders may be reshuffling as nearly half the world’s population heads to the polls amid continued war in the Middle East and Eastern Europe. Inflation continues to gnaw at our wallets as well. Economic policymakers are trying to navigate a landscape with few good precedents—and headlines and pundits fret that a misstep could jack up inflation or send the economy into recession. Hello, fear.

Meanwhile, with the usual assortment of financial frenzies grasping for your attention, you may have felt a bit of FOMO (fear of missing out) creeping in. Nvidia and other AI stocks catapulted upward through most of the second quarter. Bitcoin gained about 40% year to date, and gold jumped about 22% from its six-month low to its six-month high as of June 30. Meme stocks even reared their head again, with GameStop and AMC making headlines.

Fear and FOMO may seem like opposites. But taken to extremes, either can wreak similar havoc on your success as an investor. Which is why, as we enter the second half of another exciting year, now seems like an excellent time to review the lessons history offers us on investing long-term and remind you why we build your portfolios as we do.

In a word, it’s about freedom.

Financial consultant Dan Richards writes, “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.”

Where can you find that kind of discipline and resolve? History can help. The returns and risk produced by various types of assets over time underlie all sound investment plans. Those historical results encompass 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 bubble).

Your globally diversified portfolio is built for these times—for all times—tailored for your goals, time horizon and risk tolerance. It’s built to liberate you from fear and FOMO alike.

This year, it may be especially helpful to remember that election outcomes historically have had little to no meaningful impact on your results as a long-term investor. Research by Fidelity shows that the S&P 500 has produced very similar returns under Democratic and Republican presidents, no matter which party controlled Congress. Even individual sectors don’t seem to care much whether the White House goes blue or red: In presidential election years since 1976, every single sector has outperformed in years Republicans won and in years Democrats won. Every sector has underperformed amid both parties’ victories too. So, the next time you read that one candidate is good or bad for energy or technology or health care or financials, it’s worth being skeptical.

Maintaining a long-term perspective that’s grounded in history can be enormously freeing. As you read, watch or listen to the news, you can register moments when you start to feel fear or FOMO—and then you can move on with your life, knowing your plan has you covered.

With that, we wish you a happy summer. If you have any questions or concerns, please reach out and let us know how we can help.

Regards,

Custom Wealth Planners

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