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Staying the Course

Staying the Course

Inflation reaches a four-decade high, recession risks continue to increase, the S&P 500 is now in bear market territory, the Consumer Confidence Index hits an all-time low. It’s understandable to get nervous, anxious, and even fearful when we are continuously bombarded with these kinds of headlines so frequently as of late.  

Despite the steep market selloff experienced in March of 2020, caused by the onset of the COVID-19 pandemic, the S&P 500 quickly recovered and posted new all-time highs. We have seen the S&P 500 post double-digit gains in the last three calendar years (and in 8 of the last 10). We have lived in a low inflationary environment for so long that the current high inflation we are experiencing is relatively new for many investors. Although the near future may seem challenging and overwhelming, we, as investors, should focus on the areas where we have control versus those where we have little to none.  We highlight some of these areas below:

  • Talk to your advisor or financial professional. In times like these it is especially important to revisit your financial plan and review your progress. You may find that although your portfolio has experienced a dip, you are still well on track to reach the financial goals you have set.   
  • Reassess risk tolerance. If the market volatility experienced in your portfolio has made you uncomfortable, then reassessing your risk tolerance will help guide the conversation in determining if a new mix of stocks, bonds, and alternative investments may be right for you.
  • Retirement contributions. Make sure you are maximizing your retirement contributions, especially if there is an employer match, in order to allow you to take full advantage of current market opportunities and with investments available at a discount relative to recent prices.
  • Tax-loss harvesting. Now could be a good time to revisit your individual investments and realize capital gain losses that can be used to offset future capital gains. This will also allow you to reduce the concentration risk that is present in portfolios owning large positions of individual securities with unrealized gains.
  • Rebalance your portfolio. This refers to selling from parts of your portfolio, such as bonds, that have performed relatively well and purchasing investments that have not fared as well.  This process allows you to realign your allocation mix (stocks/bonds/alternatives) to your intended targets.

Although all downturns, bear markets, and recessionary environments are different, we believe the points mentioned above could help make navigating these times easier and will leave the investor in a more favorable position when markets inevitably rebound.


Written by Cesar Ortega, Associate Portfolio Manager