“What we want to see is a series of declining monthly readings for inflation. Ultimately, we’re not going to declare victory until we … really see convincing evidence, compelling evidence, that inflation is coming down.”
– Fed Chair Jerome Powell
As we move into the humid dog days of August, a rally across equity markets in July provided investors with a slight, but much-needed, respite. Since reaching a historic high on January 3, the S&P 500 descended into bear market territory, shedding as much as 23.6% by mid-June. Since then, things have stabilized. Energy prices have pulled back: U.S. crude oil was hovering around $120 a barrel; it is now about $100. The price of gas was over $5 a gallon and is now under $4.50. The decline in energy prices, along with the Fed raising rates again in July by 0.75%, has bolstered confidence among market participants that we may have seen a turning point in inflation.
In difficult markets, it can be challenging to escape the relentless flow of news highlighting the stark realities of the current environment. Our ability to make thoughtful choices for the long term can quickly be overwhelmed by the negative emotions we experience in the short term. When that happens, charts of past market declines and subsequent rebounds can fail to soothe the anxieties we are feeling.
So, what can we do? Research on investor behavior suggests that there are two key actions we should consider:
- Remove ourselves from emotional stimulus, turn off financial market news and check our portfolios less frequently.
- Pause making in-the-moment financial decisions and return to them when the emotional rawness of the immediate environment has subsided.
We cannot disconnect ourselves from the impact emotions play on our investment decisions. However, we can seek to make those decisions when the strength of our feelings doesn’t overwhelm a deliberative, rational process.
Articles of Interest
Like the phoenix, the 60/40 portfolio will rise again
Periodically, pundits declare the death of the 60% stock/40% bond portfolio. Their voices have grown louder lately, amid sharp declines in both stock and bond prices. But we’ve been here before. Based on history, balanced portfolios are apt to prove the naysayers wrong, again.
Stocks For the Long Run
There are no guarantees when it comes to investing in the stock market. You don’t know the exact odds before placing a trade. But thinking through the historical return profiles of stocks, bonds, and cash can help you determine how to plan for time horizons ranging from short-term to intermediate-term to long-term and allocate your portfolio accordingly.
8 Reasons Why the 1929 Stock Market Crash Won’t Happen Again
Every time the economy goes on a downward spiral, many people refer to the 1929 stock market crash and subsequent depression, often considered to be an example of how bad things could get. Here are eight reasons why we are unlikely to see a similar crash and depression again.
Financial Advice I Would Give My Younger Self – Planning for Education Funding
Saving for college is often thought of from the perspective of the parent saving for the child, and if you are one of the lucky ones whose parents can afford to have done that for you, good for you. However, college savings, or more appropriately education savings, is not a dominion strictly reserved from parent to child.
Yelp’s Best Ice Cream in Every State and Province 2022
National Ice Cream Day was in July. But a delicious frozen treat is welcome any time in summer. Whether you’re a sucker for a traditional vanilla ice cream waffle cone, ice cream sandwich, or soft serve—or want to get adventurous with small-batch ice cream flavors like ube, buttered popcorn or sea salt—this list will have your taste buds begging for a scoop.
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S&P 500 Index represents the 500 leading U.S. companies, approximately 80% of the total U.S. market capitalization.