New Year, Same Discipline.
As we start this new calendar year, for many it’s the time for resolutions, predictions, and all sorts of other January traditions. There are those resolutions that we can all agree seem like good ideas – exercise more, eat healthier, go to bed earlier, read more books, etc. You know the drill. And then there are the predictions that may seem like fun, and even bring out one’s competitive spirit, but at the end of the day just really don’t matter.
The January prediction that those of us at Woodward Financial Advisors get the most amusement from is the old “stock market forecast” espoused by various industry “experts”. Wall Street can’t help itself from attempting to predict how the market will do each year, even though their track record is pretty dismal. 2023 was a perfect example of how foolish this exercise really is, as well as how it could hurt your long-term financial health if you actually take these predictions as truth.
Recall a year ago when nearly all the “experts” were essentially guaranteeing a recession? What has happened since has been basically the opposite. Despite the Federal Reserve raising interest rates at a furious clip, a war breaking out in the Middle East, the war in Ukraine dragging into a second year, and a substantial regional banking crisis (see Silicon Valley Bank), the market and economy seemingly shrugged it off and powered upward. In fact, the S&P 500 Index was up roughly 24% in 2023 and ended the year in record territory!
I’ve always loved investing legend Warren Buffett’s quote: “The only value of stock forecasters is to make fortune-tellers look good.”
We talk with clients often about lifeboat drills. You conduct a lifeboat drill when your ship is at port, when the winds are calm, and when the sky is clear. You wouldn’t want to do this drill in the middle of the ocean with a storm battering your ship. The same holds true for investing - you want to prepare yourself for the inevitable future volatility of the market when things are “calm”. Now would be that time. Yes, most stock markets are at all-time highs and things feel pretty good. We know, however, that the next “crisis du jour” is somewhere around the corner, and that when it comes, every pundit on Wall-Street will be saying, “The Sky is Falling!” or “The Recession is Finally Here”.
So, as disciplined investors, let’s all raise our right hands now and repeat the following: “We will not harm ourselves by changing our long-term investment strategy when the next market downturn occurs!” Ignoring the doom and gloom predictions and staying the course is always the winning strategy in the long run. It may not be easy, just like adding all those raw vegetables into your New Year diet, but it’s the best thing for you!
If you’d like to read about some New Year’s resolutions from one of Woodward’s own, please check out Taylor’s recent blog piece HERE.
If you have any questions about your investment portfolio, your team at Woodward Financial Advisors is here and happy to discuss.
Written by Jim Miller, CFP®