The US stock market’s performance during the first quarter has been “interesting” once again.
Of course, no one is happy to see their stocks (and overall portfolio) go down in value, but there are some valuable lessons to glean from what’s been happening this year that are worth pointing out, because it highlights an absolutely critical principle every investor must understand. It is this…
When you’re well diversified, you’re never 100% happy. Let me explain.
The Greek philosopher Heraclitus is credited with saying “everything changes and nothing remains still.” He argued that this saying captures the essence of the entire universe. I’m not sure if he’s right or wrong, but it certainly gets close to capturing the essence of economic events across the world.
Are there lessons to be learned from world economic events and how they impact financial markets, particularly stocks? I’d like to explore this idea briefly today, and I promise it won’t get too deep or nerdy. In fact, by the time I’m done you may have some added perspective to help you navigate the uncertain times we’ve always been in, and will continue to experience.
The financial shock of soaring inflation in 2022 caught everyone off guard. Within a matter of months, the price of rent, fuel, and countless consumer goods went through the roof. Having been in a period of relatively low, calm inflation for decades led us not to worry about this financial expense, until things went really wrong.
While inflation is now trending downward, inflation is historically always present, and there’s still a threat that unusually high inflation can rear its ugly head once again, especially given that most retirees expect to live another 20 to 30 years once they leave the workforce.
What a difference a year makes. Last May I was encouraging readers to never make investment decisions on emotion and to stick to their plan. Sticking with it is hard to do when stock and bond values drop significantly, as they were last year. Borrowing rates were also starting to climb, inflation was soaring, and one-year US Treasury bills were only yielding about 2%. It felt like there was no safe place to turn.