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Staying the Course In Uncertain Times

Staying the Course In Uncertain Times

May 25, 2022

Let history, not hysteria, guide your investment decisions

You’ve probably seen a lot of stories lately about bad times and bear markets ahead. Inflation has been rising, one story says. The next story says the U.S. economy is contracting. A third story might highlight supply-chain shortfalls, and a fourth offers details about rising jobless claims. The media thrives on stories that are engaging, timely, and true, so here’s a story we think investors should know that’s always timely and more true than ever. It’s a parable called The Lucky Farmer.

A farmer had a prized stallion. “Oh, how lucky you are!” the neighbors would say. He would shrug and reply, “Well…  maybe.”

One day, the horse leaped a fence and ran away. “Oh, how unlucky!” said the neighbors, and he replied, “Well… maybe.”

The next week, the stallion returned, leading a beautiful wild mare. “Oh, how lucky!” said the neighbors, and he replied, “Well… maybe.”

Then his son tried to tame the wild mare and broke his leg. “Oh, how unlucky!” said the neighbors, and the farmer replied, “Well… maybe.”

The next week, officers from the emperor came to town to conscript all the able-bodied young men to fight in a distant war. Because the son was already injured, he was sent back home. “Oh, how lucky!” the neighbors said.

The farmer shrugged, “Well… maybe!”

That farmer understood a lesson that every investor needs to learn: The world is full of changes, and today’s bad news can lead to tomorrow’s good news in ways you may not always see coming. What we can do is prepare for ups and downs while keeping our eyes on our long-term plans, with history as our guide.

Investing Beyond the Headlines

What does history tell us about market contractions? Put simply, that they don’t last and, year over year, have a slightly better than even chance of reversing themselves.

All markets can be volatile, and when things start a general downward trend, it can serve as a useful reminder to check how well diversified your portfolio is. Like a pilot in adverse winds, keep calm, make a slight correction, and you should be able to stay safely on course. A financial advisor’s guidance can help you navigate periods of volatility with greater confidence.

As investment managers, we monitor our clients’ portfolio diversity, keep them well-informed on world events, but also remind them of the Lucky Farmer: Don’t react to today’s headlines, but think in terms of what might happen three, four, or five steps ahead.


Change is the Only Constant

Take, for example, some events covered in a recent Cetera Investment Management Weekly Recap.  In the first week of May, initial jobless claims rose by 19,000 to an 11-week high of 200,000 — even higher than official estimates of 180,000.

You can almost hear the neighbors say: “Oh, how unlucky!” But keep looking. Continuing jobless claims are historically low, falling by 19,000 to 1.384 million, the fewest since 1970. Does that sound lucky? The only prudent answer is: “Well… maybe!”

In times of growth, it’s easy to get irrationally optimistic, and in times of volatility, it’s easy to be overwhelmed by an equally irrational desire to react. Everyone’s risk tolerance is different, but consulting with one of our financial advisors can provide the necessary market perspectives and investment guidance to keep your portfolio well-balanced and your investment decisions as wise as possible.   

Investors should consider their financial ability to continue to purchase through periods of low price levels.

A diversified portfolio does not assure a profit or protect against loss in a declining market.

The views stated in this letter are not necessarily the opinion of Cetera Advisor Networks LLC and should not be construed directly or indirectly as an offer to buy or sell any securities mentioned herein. Due to volatility within the markets mentioned, opinions are subject to change without notice. Information is based on sources believed to be reliable; however, their accuracy or completeness cannot be guaranteed. Past performance does not guarantee future results.