We Are Half Done with 2020 & What a Long Strange Trip It Has Been

As July kicks off, we mark the half-way point of the year, and I’m reminded of the Grateful Dead song that says, “What a long, strange trip it’s been . . . .” – Robert Hunter in the Grateful Dead song “Truckin”.

To recap, here are few “highlights” of the year so far.

• The market hit an all-time high on February 19.
• Then the markets came to realize the extent of the threat of COVID-19 virus and began to decline.
• In the 33 days from February 19 to March 23 the market fell a total of 34 percent. An all-time record.
• Immediately following, the markets posted the best 50 days in history rising a total of 37.7 percent.
• On June 5 the U.S. Bureau of Labor Statistics reported that employment rose by 2.5 million jobs in May and the unemployment rate declined to 13.3 percent. The consensus estimate of labor experts was to expect job losses of 7.5 million jobs.
• On June 11, with an increase in virus cases, the market dropped almost 6 percent and the VIX (the volatility index) roast by nearly 50 percent in a single day.
• At the close on June 30 the S&P 500 posted the best quarterly gains since 1998.

That’s quite a year so far, with some of the most extreme ups and downs in market history. It’s enough to make you want to hide under the covers and not come out. Fear and dread after that list of events is entirely natural.

Humans tend to suffer a “recency bias” which is a common and powerful human tendency to assume that whatever has just happened is likely to keep happening.

So it would be entirely understandable to feel like “all is lost” and that you should pull out of all investment accounts and keep your savings in a coffee can in the back yard. The problem is that the money in the coffee can will not grow. But, the cost of food and gasoline and services historically grows by about 2.5% each year. Most of my readers are old enough to remember inflation.

If you keep the money in a coffee can for 29 years, it will buy about half what it bought when you put it in there. This is why we “invest” for retirement. We need the money to grow faster than inflation so you can afford a comfortable lifestyle in retirement.

Back to recent market news. With a bit of perspective, we see that all is not actually lost in investment markets for 2020. Remember that investing in the stocks of great American companies has ALWAYS been a great long-term strategy to build wealth and real spending power. And recent data support this.

At the end of June, the financial “media” were celebrating the “best quarter for financial markets this century.” Specifically, the S&P 500 has shown its biggest quarterly gains since 1998 – up 20 percent for the quarter.

Here is where the S&P 500 stands as of the end of June 2020:

• New all-time high closing value on February 19, 2020.
• Down 8.64% from the all-time high.
• Down 4.04% for the calendar year.
• Up 5.71% for the last 12 months.
• Up 10.05% per year over the last 5 years.

So, markets have grown about 10 percent per year over the last five years. That’s better than inflation and good enough to double your money every 7.2 years. That is EXACTLY the sort of performance we expect as we save for long-term financial goals. All is well.

But, even with all this great news, I know that many readers are worried about the chance there will be a new wave of virus in the fall and maybe a market pull-back to go with it. It’s easy to be worried and concerned.

That’s why you have a long-term financial plan. It clarifies your goals and priorities and it connects you with a financial planner to guide you.

That’s why you routinely consult with a Certified Financial Planner™ professional who is an experienced, fiduciary financial planner who constantly adjusts your investment strategy to match your financial priorities.

If you don’t have an experienced, fiduciary financial planner, I am happy to talk with you. Follow this link to set a time for us to talk. And you could also look up a couple CERTIFIED FINANCIAL PLANNER™ professionals in your area.

To find a CFP® professional near you, start your search here.

As you visit with financial planners, I suggest a couple things to check:

• Is the advisor always the client’s advocate – a fiduciary advisor?
• Is the advisor only paid by clients, not any financial product manufacturer or distribution network? That would be a fee-only advisor.

These two points help assure that you are working with a professional who is committed to your best interest at all times. It seems sort of obvious to me that a professional would work in this way, but it’s not automatic.

A fiduciary, fee-only, CFP® professional can help you make great retirement income choices and develop a comprehensive financial plan that is driven by your goals and priorities and addresses all aspects of your financial life. With a big-picture approach, you will be better prepared to understand your options at every step along the way.

Yes, I am a CFP® professional. I’m always a fiduciary and I only work on a fee basis. And yes, I’m still taking on a few great families to be part of my financial planning practice.

If this article has you thinking about your own circumstances, contact my office at rdunn@dunncreekadvisors.com. I am always happy to meet with people who are working on their retirement plans. Dunncreek Advisors does not provide legal or tax advice, nor is this article intended to do so.