2025 has been quite a year! The President is quickly introducing new tariffs, and Elon Musk's team at the Department of Government Efficiency is rapidly downsizing the government. This has caused some market turbulence and volatility, which might lead to a recession or, for now, just a sharp correction. So, how can you stay calm and collected in such a volatile market? Here are ten strategies to help you stay calm and focused:
These are just a few of the strategies that can help you manage the psychological challenges of a volatile market and stay on track with your financial goals and plans. Do you have any specific concerns or questions about your investments? References [1] Manage Emotions and Client Expectations in Volatile Markets [2] Help clients stay invested amid market volatility - BlackRock [3] Market Volatility: 10 Ways Advisors Calm Client Nerves - ETF.com [4] http://www.etf.com/sections/advisor-center/market-volatility-10-ways-advisors-calm-client-nerves
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In today's unpredictable financial landscape, market volatility has become an inevitable reality for investors. Professional wealth management isn't just a luxury, it's increasingly a necessity for those looking to protect and grow their assets regardless of market conditions. Understanding Market Volatility's Impact According to SmartAsset's February 2025 study, clients working with professional financial planners were 60% less likely to make panic-driven selling decisions during market downturns compared to self-directed investors. This disciplined approach resulted in portfolio performance that was 4.3% higher on average over a five-year period. How Financial Planners Navigate Market Turbulence A skilled financial planner brings several advantages during volatile markets: 1. Strategic Asset Allocation Professional wealth managers develop diversified portfolios designed to withstand market fluctuations. The SmartAsset study revealed that professionally managed portfolios maintained 15-20% in counter-cyclical assets, providing crucial stability during recent corrections. 2. Emotional Discipline The SmartAsset study found that 72% of self-directed investors made significant portfolio changes based on emotional reactions to market news, compared to just 18% of investors working with financial professionals. 3. Opportunistic Rebalancing Wealth management clients benefited from strategic rebalancing during market dips, with advisors increasing equity positions by an average of 12% during the last significant correction. 4. Personalized Financial Planning Professional financial planning offers customized approaches based on your unique risk tolerance, time horizon, income needs, tax situation, and estate planning goals. The February SmartAsset study highlighted that 83% of clients working with financial planners had documented investment policies that included specific volatility response strategies. 5. The Cost-Benefit Analysis The SmartAsset study provides compelling evidence that professional management pays for itself:
Finding the Right Financial Partner When selecting a wealth management professional, consider:
Conclusion: Peace of Mind Through Professional Guidance In an increasingly complex and volatile investment landscape, professional wealth management offers both performance advantages and peace of mind. The February SmartAsset study found that 87% of clients working with professional financial planners reported feeling confident in their long-term financial plans despite market turbulence while earning higher long-term performance on average and lowering both portfolio volatility and taxes. Why not partner with us today to see if you could realize similar benefits and peace of mind. Reach out today! References: SmartAsset. (February 2025). "The Value of Professional Financial Guidance During Market Volatility." SmartAsset Research Division. Sometimes blog posts come easily and sometimes they do not. Over the summer, I seem to struggle with things to write about plus market volatility tends to pick up, which keeps me busier managing money. Remember this when you are taking your vacation. Think of me as I am lugging my laptop wherever I go because Mr. (or Mrs.) Market never seems to take any time off. It's a good thing I love this stuff! First up in this special blog addition is a couple market updates. Let's start with equities and then move to fixed income (i.e., bonds). Here is the situation with equities: We have a rising trend. A recent stairstep down and elevator up correction may not be the end of the volatility though. Expect some volatility in the period leading up to the election maybe as early as September. Once the election is decided and the loser taken their shot at the fairness of the election, we should see favorable seasonality into the end of the year and possibly into early 2025. The trend is your friend until she isn't. So far so good! My guess is that 2025 is no picnic for whoever wins in November. We have weakening economic conditions and rising unemployment levels as big and small companies continue to shed jobs. On the flip side, we still have strong liquidity from past government programs, a Federal Reserve that looks ready to start easing interest rates and a recent history of magically being able to kick the can down the road. My guess is a mild bear market in 2025 with equities struggling and bonds doing better, especially on the short to intermediate side of the equation. In fact, in years where interest rates decline, this has been the time to own bonds historically as falling yields move inversely to rising bond prices. You may be saying, but Jeff, you said that about 2024. That is true, but this is not easy, and my crystal ball is about as good as yours. We generally try to work with what the market gives us. We have an opinion on the future (like above), but only move as the market confirms such opinions. You know, it is a process! This is the Federal Reserve Dot Plot or where they think the Fed Funds interest rate is heading. In case you cannot tell, follow the orange line and/or the blue dots. If rates do indeed head down, here is the potential returns for varying changes in rates and durations. Next Up, Let's move onto some good news for those affected by Hurricane Debbie. Your kind, much gentler IRS has granted you a series of filing and payment extensions. Of course, at the same time they are hiring more auditors to make your lives, I mean the lives of the rich, more miserable. Here is the skinny: Click to read more. Please consult your tax advisor for specific advice. Finally, a few financial lessons that I learned over time, but wish I would have put into practice a bit earlier. You know a few thoughts from my younger me.
Remember, financial planning is a lifelong journey. Start early, stay informed, and adapt as needed. I know I am preaching to the choir with most of you, but maybe someone you know could benefit from these ten financial lessons that I preach every day to my girls and Godchildren. Can we help you with your investments or planning? Or why not get a Free Second Opinion on your planning? Just contact us.
I finally got around to putting out a new blog post, I must say I struggled to come up with just the right topic that would both interest me and our readers. I wanted to do a financial planning related post, but over the weekend I changed my mind. I was drawn to a video debate between Macro specialist Raoul Pal of Real Vision and Peter Schiff of Euro Pacific Asset Management.
This rather long video is posted, below. I thought the discussion was so important for investors over the next 6+ years that I would make it part of my discussion and forecast on what is coming in this very strange time in our country and economic future. In case you don't have 3 hours to spend watching this video, let me give you the highlights. The primary topic of this discussion was Bitcoin and its role in the current economic landscape. Let’s delve into some key points from their debate:
So now let me put in my 2 cents. First, I am in agreement with both Raoul Pal and Peter Schiff that politicians will continue to print currency and tax us as a way of kicking the can down the road on the United States rapidly growing debt problem and poor demographics. They will always do what is easy and gets them reelected. Printing, spending and then taxing us is the easy path vs. austerity measures to fix our debt to GDP imbalance. Second, I believe Bitcoin and Crypto are part of the solution, but not "the solution." Why? a) Bitcoin is correlated to the equity markets and is a very volatile asset type. Pushing all your chips into this pile will definitely cause you some sleepless nights. b) There is governmental risk here. Any day we could wake up and the government has either outlawed crypto or mandated a conversion to a newly issued Central Bank Digital Coin (or CBDC); and finally, c) I still believe diversification has value and crypto is not a very large, or liquid market. Third, I would make the case that 2030 is an important year in Raoul Pal's mind, even if he never explained why. Allow me to speculate, it is the year that the World Economic Forums (WEF) 2030 Agenda is supposed to be in place. This could mean a new economic system is in place by 2030 that changes/saves the developed world from a new universal problem with debt relative to GDP and poor demographics. In case you are not familiar with the WEF 2030 agenda, here are the highlights:
You can click on any of the links for more information. Here are my thoughts on this WEF 2030 Agenda. Basically, the WEF is composed a who's who of global leaders that think they know better than us or any individual government what is best for us and them. It is the "them" part that worries me the most. The above agenda sounds great in a vacuum, but the primary purpose of this agenda is the separate the elite from the serf (i.e., you and me) and make us subservient to the corporate elite. The result will be a highly advanced, AI based society where every move you make, financially or otherwise, is scrutinized. Every word or deed out of line with the thoughts of the elite will be penalized (i.e., social credit scoring). My belief is that by 2030 a CBDC or series of CBDCs will be rolled out globally. These CBDCs may not be universally utilized, as is now the case in China, but the infrastructure will be there. Given that the backbone of the CBDCs will be blockchain based all activity will be captured, stored and reviewed using AI. The only thing missing will be an event, a crisis pushing everyone into CBDC or the global system. This I believe is the change that Raoul Pal sees in our future but was unwilling to speculate on it as I have done. So why do I present this video, agenda and hypothesis to you? The answer is simple and that is so you can take advantage of what is available today to create wealth and provide yourself a greater runway to operate in a possible new financial system to come. Further as a Christian believer, it is a bit of a warning as the Christian Bible talks about such a time where there is both a one world currency and a one world leader. No one knows the timing on this stuff, but I can certainly see the seeds of what is potentially coming. So now how do you prosper in the next six plus years to come? Here is my take:
Where can we help? We can help you with all of the above as well as financial planning. Want to start a conversation, click here to contact us. In our last post entitled "Why Understanding Up and Down Capture is Important to You?" we talked about both up and down capture and how they fit with secular periods of market consolidation. We also discussed that the ideal manager has both a lower down capture and a high up capture ratio. As an example, a 60% down capture means that you only lost 60% of what the benchmark loses in periods where it declines on average. Further, we noted that InTrust’s historical up capture is about 86% on average for our active investment strategies. Our down capture is about 56% in round numbers for the same active strategies.1 The real secret to such metrics is when markets are volatile, like we had in the last secular bear market that lasted from 1966 to 1982 or 2000 to 2009. In my opinion, we are now in a secular bear market, and I believe it will be a brute, like the one that spanned the 1970s. It will not be identical to the 1970s as no two periods are alike, but it will have a number of similarities. The reason secular bear market and cyclical cycles are important is that differing investment strategies perform differently during such cycles. Passive or buy and hold performs best in secular bull cycles. This is because they do not practice risk management other than via diversification, they are low cost and do not make significate changes to the portfolio holdings or exposures. In other words, they are very lean and efficient. Active strategies perform best in secular bear cycles. This is because they do practice risk management including diversification but also changes to exposure, positions and more. What is a drag on performance in the secular bull period helps enhance and protect returns in a secular bear market. We mix active and passive strategies because we never really know what markets will do but we obviously can make educated guesses or assumptions. Let’s take a look at an example of what happens to return in a secular bear market cycle when proper risk management is applied, and market exposure is adjusted for the market environment. In other words, the manager captures only a reasonable percentage of up market returns and/or a low-down market capture ratio. In this case, I applied our average up and down capture to benchmark returns for the period 2000 - 2010 where Actively Managed Large Blend strategies outperformed. This is not a perfect comparison, but a majority of our active strategies use this index (i.e., the Dow Jones Industrial Average) as at least part of the blended benchmark index. So, what did we discover? The average performance increase was 2.7% per annum over just buying and holding the index over this period. Again, we may have captured less up market performance, but we avoided more of the down-market under-performance and in this period, there was a great deal of market volatility. Let’s go back a bit further, let’s say we have a repeat of the 1966 – 1982 secular bear market that included the volatile 1970s. What does that look like? Even during this volatile period, applying InTrust’s historical up and down capture rations resulted in an average 3.1% per annum performance pick up for this period over just buying and holding the index.
Now these are all proforma or hypothetical results, but I do believe we can draw a few conclusions. First, there are definitely periods for markets where just buying and holding (i.e., passive management) will underperform. See Hartford’s chart of Active and Passive Outperformance Trends in the post, Understanding Up and Down Capture of Returns. Second, from a probability perspective, we are likely due for one of those periods based on Hartford’s chart of Active and Passive Outperformance Trends. Finally, you need to be prepared for such periods. Most American’s suffer from recency bias and overweight what has been working to the detriment of what has not been working as well. This bias can really hurt investors when Mr. Market flips the switch and decides to benefit the active managers by making markets more challenging for everyone. My guess, my friends, is that we started such a period at the beginning of 2022. Let us know how we can help you be ready for Mr. Market flip of the switch. Disclosures/Footnotes 1 Excludes our modified buy and hold or passive strategies. This statistical is based on historical data from inception through July 2023 for each active strategy. The Dow Jones Industrial Average is a price-weighted average of 30 significant stocks traded on the New York Stock Exchange and the Nasdaq. The DJI was invented by Charles Dow back in 1896. The up-market capture ratio is the statistical measure of an investment manager's overall performance in up-markets. It is used to evaluate how well an investment manager performed relative to an index during periods when that index has risen. The up-market capture ratio can be compared with the down-market capture ratio. In practice, both measures are used in tandem. The down-market capture ratio is a statistical measure of an investment manager's overall performance in down-markets. It is used to evaluate how well an investment manager performed relative to an index during periods when that index has dropped. The ratio is calculated by dividing the manager's returns by the returns of the index during the down-market and multiplying that factor by 100. |