Well, That Escalated Quickly

Clients & Friends,

What happened to all the optimism from a month ago?! It’s long gone. It’s like it evaporated overnight.

Last week, with the market down a mere 3%, something interesting happened: Investor sentiment fell off a cliff. According to the American Association of Individual Investors^[1], last week’s investor sentiment reading reported some of the lowest levels of optimism and the highest levels of pessimism in its 37-year history.

As you can imagine in an environment that is rapidly turning pessimistic, volatility is spiking^[2], bond yields are falling^[3], and the stock market is falling from its highs, now roughly back to election day prices^[4].

Investors aren’t just worried about the stock market. There seems to be broadening concern about the future of our government, that our economy might implode, that Social Security and Medicare are in doubt, that global trade will come to a screeching halt, that geopolitical conflict is a real possibility, and so on.

It’s almost as if many investors feel that the world is at an inflection point—so much so that I’ve heard the four most dangerous words in investing, "this time is different,” a few times already.

While I could cite many examples of times when the world was, by most accounts, much scarier than it is today (Cuban missile crisis, Cold War, 9/11, Great Financial Crisis, early days of the COVID pandemic), I’m not sure that recounting those events would be all that helpful right this minute.

If, for no other reason, those events are all distant memories now, so we remember them as far less worrisome than they were because we know that everything turned out okay. But they were tenuous times, to say the least.

Despite history, many pundits are describing today’s surprises and uncertainties as “unprecedented,” but are they? I think not, as writer Kelly Hayes^[5] once remarked that,

“Everything feels unprecedented when you haven’t engaged with history.”

Admittedly, it’s difficult to maintain patience and discipline in a world that feels like it’s falling apart. I get it. I really do.

So, I’m not attempting to minimize anyone’s fears, but when things get crazy, people are quick to discard history as if it has lost all relevance. While I’m confident that history is as relevant as ever, I’ll admit that it may not provide much comfort as the storm clouds grow larger overhead.

I’ll get to how we might find comfort in a moment, but before I do, here’s a hard truth about today’s world: Enduring uncertainty will not get any easier.

Thanks to our 24/7 access to real-time “news” that inevitably suits our pre-existing biases, we’re exposed almost exclusively to events that raise our blood pressure.

Our respective political preferences are irrelevant, as we’re all fed headlines that promote maximum anxiety and rage because that’s what keeps us coming back for more.

It’s as unfortunate as it is true. The era of Walter Cronkite is long gone.

With all that said, I want to offer an idea that might encourage confidence and comfort when you feel your blood pressure rising.

Here it is: Remember that you (we) have put in the work. Remember that we have planned meticulously for incredibly wide-ranging scenarios to make you and your financial plan as resilient as possible.

Does that planning guarantee success? Of course not. Nothing can do that, but good planning can, and hopefully does, encourage confidence that you are prepared for the unexpected, regardless of how it presents itself.

We’ve known all along that uncertainty would return. It always does.

But my reminder to you is that times like right now aren’t a time to abandon your plan. On the contrary, this is when the planning that we’ve done is most valuable. Times like this are exactly why we’ve spent countless hours thinking, planning, and strategizing. It’s all been in preparation for the incalculable world we live in^[6].

Thus, I’m not asking you to believe that we know when or how things will calm down. I am simply encouraging you to exercise faith that we’ve done the work required and that you are as prepared as is reasonably possible for whatever comes next. This too shall pass. Eventually.

As always, stay the course!

David

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