Given recent events, we sense a need to send you this booster shot of “Vitamin C(alm)”. After numerous conversations with clients during annual review meetings, we thought this would be a good time to discuss the ultimate impact of the ‘Crises du jour’ on your financial plan. Our intent is not to downplay the significance of the events of this year. The invasion of Ukraine, supply chain disruptions, inflation, fuel prices and domestic unrest are all serious matters. We are also just a few months from a midterm election which will likely be particularly contentious. That said, while these events and others, make for emotionally charged headlines, they must not cause you to lose faith in your long-term financial plan. If events such as these destroyed long-term progress, none of us would be where we are today.

Long-term clients often give us a quick eye roll at this point and say, “Yes we know, you’re going to tell us the same thing you always do”. While that may seem to be the case it isn’t exactly true. Like ducks on a pond, we appear to be doing little on the surface. Below the water line, however, is constant activity. If there’s a need to be concerned, we will pass that information along. If we feel the need to reallocate a portfolio, as many of you recently experienced, we will. But, given the history of our country, and the free world for that matter, it’s hard to imagine a “current event” that would cause us to adjust the investment strategy of your long-term financial plan. A change in your life might dictate that but not the crises du jour. Nonetheless, much like Vitamin C, we all need regular doses of these reminders because we don’t naturally retain either Vitamin C or “Vitamin Calm”.

In writing this email, we reflected on our decades of advising clients and recalled the long periods of calm interrupted by a few periods of concern.
Since we are in one of those “concerned” periods, it’s time to reiterate the bear market/recession data!

While we did have a technical recession a couple of years ago, it was so quick we didn’t have the opportunity to present the data! So, here’s the Bear Market/Recession talk:

We at Rogan & Associates, are unable to time our investments to take advantage of any declines that may or may not be related to the recession we may or may not be about to have. We aren’t ashamed of this because no one else can either. Furthermore, there is no upside in guessing at such things.

Equities (stock) prices reflect future expectations. Historically, the market decline related to a recession ends in the early weeks or months of the recession. Often, it’s unknown if we’re even in a recession at that point. The National Bureau of Economic Research – the US Government arbiter of when a recession officially begins and ends – usually takes months to make the call. It would not be unusual for the official announcement of a recession to come after the recession had ended.

Historically, equity markets (we’ll use the S&P 500 index for this discussion) rise an average of 6 years and decline on average one year. They nearly triple on average during the 6-year periods and decline by about a third during the downturn. The financial media spends the first years of the up market denying the increase is occurring, often predicting the rise to be short-lived. Then, when the increase is no longer deniable, they join the crowd and hype the investments that have risen the fastest. Then, at the earliest indication of concern, they go back to their beloved predictions of doom and destruction.

During the economic expansions, the economy has grown about 25%, and during recessions has contracted just less than 2%. Which is one reason we’ve seen the increases that we have.

Your long-term, life-goal focused financial plan takes all of this into consideration and is designed to give you the greatest probability of success.

Our newer clients tend to find the first stock market decline (aka sale) more disconcerting than subsequent ones. Hopefully, during our initial conversations we prepared you for inevitable periods of concern. (aka down markets). So far, every decline has been temporary and largely forgotten. Our regulators often remind us that we can’t guarantee or promise anything with regard to markets or performance and we never do.
However, we plan based on what has always happened through good times and bad. We don’t know how to plan based on what has never happened. Similarly, we can’t promise or guarantee summer afternoon thunderstorms in Florida. But we feel confident that they’re coming and that we’ll still be here when they’re over.

However stressful a market sale in the early days of a new Client relationship may be, it might be the best time it can happen. The sooner they observe how their portfolios withstand these temporary sales and subsequently recover, the more confident they become.
Ultimately, we welcome all our clients rolling their eyes at our continued message of calmly staying on plan and allowing the plan to work.

While the events and names change through history, it isn’t different this time.
The sooner everyone stops spending so much time worrying, the sooner we all get to focus on what really matters in life – loved ones, happiness, and life experiences!

Have a prosperous week,

Rogan & Associates Financial Planners