The last 14 months have been rough, so pat yourself on the back for making it this far.
Since January 1, 2022, the S&P 500 is down 18.3%.
The real kick in the pants is that bonds are ALSO down 14% since then.
Bonds are supposed to smooth out the ride when the stock market isn’t cooperating.
But when rates go up, bond prices fall.
The Fed has raised rates faster than at any point in history over the last 12 months, which has also crushed bond prices.
So the conservative part of your portfolio is ALSO down!
ARGH!
(The bright spot is you’re finally earning interest on your Emergency Fund.)
WHAT’S AN INVESTOR TO DO?
There’s a super fancy, incredibly shiny, brandy new investment that just came out.
It costs nothing to acquire and you can get it immediately.
The name of this game-changer is….
PATIENCE
Yeah, yeah. I know. “Rick, you sound like a broken record,” I hear you saying.
But this too shall pass.
And I stand by my prediction that when it’s over, it’ll bounce back faster than ChatGPT can write a term paper.
WHAT ABOUT THE RETIRED OR PRE-RETIRED?
We’ve got plenty of retirees of all ages that are living off their savings.
Not a single of them has been knocked off course over the last 14 months.
And that’s because we don’t use bond funds for passive income, we use actual bonds.
If you hold a bond until it matures, you’ll get your principal back and all the interest along the way, so we don’t care what our bonds are trading for right now.
MY 2023 MARKET PREDICTION
It’s entirely possible this will drag on for the rest of 2023.
But I think the beginning of the end for this downturn will be when the Fed is done tightening.
It might take a quarter or two for the rate increases to work their way through the economy which means potentially more layoffs and economic pain.
But once we’re on the other side of that, it’s a ChatGPT term paper all the way!
