Market Insights

September 2022 -- An Investor Check-In

September 2022

The week after Labor Day often feels like a new beginning, New Year's without the cold and ice. Maybe it is those old back-to-school reflexes, or the beginning of football season. Those of us who are a little older remember September as when the new television season kicked off. Whatever the origins, September remains a good time to re-position and reconsider what the year has brought so far and what we need to do to get ready for year-end and beyond. September 2022 is a particularly good time to evaluate our investment objectives and how we are positioned to achieve these objectives. Stock indices are down uniformly, even after a late summer move up followed by a lesser decline back down. The news is full of reasons for these declines -- inflation, interest rate hikes, the war in Ukraine -- and it has been easy to be unduly swayed by every passing headline. But an investor always needs to have a long term perspective. Sometimes to do this all that is needed is a simple historical fact -- over the past 50 years, the S&P 500 has returned an average of 10.49% (6.26% after inflation). Imagine that, over a 10% return, through good times and bad, Vietnam, Watergate, the 1982 recession, the booming 1990's, 9/11, the 2008 financial crisis, and most recently COVID-19. Indeed, a friend recently said that five or ten years from now, an investor looking at a graph of stock market returns may barely see a blip in the long term growth of US stock market indices and related returns despite all the anguish and volatility so far in 2022. The reason why this will probably be the case is the reason why it has always been the case, an investment in stocks, particularly in the most solid and successful companies, is an investment in the long term growth of the American economy and the businesses and industries that drive that economy. These investments are not always without volatility, just as the economy itself is not without ups and downs and periods of fear. Yet through it all, investors are rewarded for perseverance and pragmatism, for level headedness, and, just a little bit of foresight as to those companies and industries at the forefront of economic growth and progress.

With that bit of historical context in mind, here is a list of factors to weigh as we head into the last quarter of 2022:

  • Market timing, whether focused on headlines or a "gut" feeling as to what may happen, is almost always a recipe for suboptimal returns. Things always feel worst at the bottom, when market observers, amplified by business media, are at their most vocal as to the dangers ahead, even after 20-30% declines as we have had this year. In many ways the old maxim is correct, long-term wealth is created by time in the market not market timing.
  • Reaping the long-term benefits of investing is easier if you have enough cash set aside for short-term financial needs. In times of economic stress, trimming stock holdings to increase that amount from six to twelve months of cash requirements can often be an important step to retain the ability to withstand falling financial markets and invest more as valuations get more attractive.
  • Political beliefs, especially as we head into important elections, should never seriously affect your overall investment strategy. Yes, individual companies can sometimes be affected, in the short term, by legislative proposals and regulatory actions, but the amount of emotion generated by partisans on both sides of the spectrum should not be taken as investment cues. For example, even if you knew all the results of the upcoming midterm election, would you know how to turn that into specific buys and sells? Not in an economy that is still overwhelmingly dictated by private as opposed to governmental decisions.
  • Don't chase headlines with regard to specific stocks or industries. If the news has been uniformly bad about a particular company, and the stock is bouncing along valuation lows, there may be more upside than downside if analysis suggests the issues are short-term and the underlying strengths of a business remain to be capitalized on.
  • Finally, you do not need to do this alone. If you are busy with jobs and families, or even if you're just trying to enjoy retirement, work on your investment portfolio can be supervised by dedicated professionals. Arrival Capital is ready to give your investments and overall financial picture a thorough analysis and then take you in the right direction, to reap the benefits of an improving economic situation and tap into the wealth generation of the best companies and businesses in the world today and tomorrow.

Happy Autumn!

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