“The best time to plant a tree was 20 years ago. The second best time is now.” – Chinese Proverb
The S&P 500 has lost 25% this year.1 Many are worried about further downturns in the market due to a Recession! That word is like saying cancer or Satan. People start looking around and ask you to keep your voice down.
Maybe your advisor is meeting you to say “it’s ok. The markets go through times like this. You have good investments, time on your side, a buy and hold strategy of our company’s favorite investments won’t fail you,” your advisor says with confidence, good hair and a knowing twinkle in his eye.
Isn’t that special. Once outside in the Texas sun you remember that there is a lot of messed up stuff going on. Inflation like we haven’t seen in 5 decades, there is possibility of food shortages, a former President being pursued like a criminal, Russia is threatening to drop nukes, actual worry that people in the US will freeze this winter, need I go on?
We believe that we are in the opening scene of the movie, more is to come. If your account is down 25%, that takes you back to 11/16/2020. (If invested in the S&P 5001) If you are invested in bonds, your positions are likely down 10-30%. Unfortunately, there is more pain to come as the Fed is not done raising rates. Expect relief rallies in the market with another drop around the corner. This is no way to live!
The problem is not so much ‘buy & hold’ is a bad strategy, is it the right one for your stage in life? When approaching retirement or in retirement you don’t have time to recover from market declines. The last 2 big ones (2000-2002 & 2008-2009) took 7 and 6 years to recover. And that is just getting back to where you were! It took more time to start making money. Any withdraws for let’s say ‘retirement income’ erodes your savings, for good!
Hindsight is 20/20, so it easy to say that now but what message have we been putting out? See the short list below. (Call us to receive a copy of past newsletters.)
• July 2021 “When is it Time to Cash Out?” We encouraged taking some money out of stock market investments.
• August 2021 “Is a Bubble Forming?” We warned of the dangers of what could be an inflated market.
• September 2021 “Why is Volatility Dangerous in Retirement?” We quoted headlines warning of problems in stocks and bonds.
• November 2021 “It’s Time to Move from the G to the I” we encouraged dividend stocks and to avoid bonds.
• January 2022 “Looking Forward in 2022” we warned that the market is overvalued at this point and to consider dividend stocks for less volatility. We also warned against Bonds, since the Feds were looking to raise rates.
• April 2022 “Is the Recession here?” Quote from the newsletter, “There is likely a rough road ahead. It would make sense to review your portfolio now rather than after the next -20% drop.” (The S&P on 3/28/2022 was down -2.8%2.)
• June 2022 “When You See a Bear, Don’t Run!” Quote from the newsletter, “Now is the time to reevaluate what you are invested in.”
Now is a good time to review your situation. With inflation at over 8% you can’t stay in cash forever. There are solutions. This is the 2nd best time to call. (See quote above)
Don’t Count On the Red Wave (Neither One Of Us Takes Credit For This Portion Of the Article, Skipping Away From Controversy)
If you’re a Republican, you are loving the news that seems to indicate that a Red Wave will take the House and Senate on November 8th. The markets may even rise on such news. But we caution you on assuming that the economy is fine and recession will be averted or ended.
What has happened on a national economic level has to work itself out. (Hang over from Covid)
The executive branch (the big guy) doesn’t seem keen on loosening our oil policy by encouraging domestic production. Oil is a major input for inflation with other international problems effecting inflation. We think there will be a major headline coming. Maybe it is intuition on my part but I have seen these kind of markets 2x’s before. China seems poised to invade Taiwan and Russia is potentially becoming internally unstable. (Remember they have a lot of nukes.) That being said, we have started moving from heavy cash into our model portfolio investments. Why? It is dangerous long term to s t ay in cash especially with inflation above 8% and with many dividend stocks now having what we call accidental high yield3 plus decent upside, this seems to be a good time to buy. (These comments may apply differently to individual clients dependi ng on your risk, time horizon, and financial resources.) As far as the Red Wave if it happens, w e expect little to get done and lots of investigations and committees of what the Biden Administration has been doing with little real legislation that helps anything. To many this is a good thing. As far as the economy is concern ed it always comes back, that is not the issue. Volatility can kill a portfolio when you are taking income unless there is a clear plan to deal with that. We have a number of market and non-market strategies that may help you reach you restore a littl e sanity in an insane world.
If your accounts seem a little insane, now is a good time to visit.
Social Security Hacks
2023 Social Security COLA4 8.7%
Oh, you want more? According to the SSA report, “Your Retirement Benefit: How it’s figured” so stop asking5 it says:
You’re eligible for cost-of-living benefit increases starting with the year you turn age 62. This is true even if you don’t get benefits until your full retirement age or even age 70.We add cost-of-living increases to your benefitbeginning with the year you reach 62. Benefits areadjusted yearly to reflect the increase, if any, in the cost-of-living as measured by the Consumer Price Index.
Sources Citations Bibliography:
⦁ Year to Date S&P 500 as of 10/10/22 Yahoo Finance
⦁ Yahoo Finance. You cannot invest in an Index. Investments based on an index are available with additional costs and potential tracking errors. Income Specialists is not a designation or official certification. Our primary focus is providing income solutions of all kinds and it is our focus as Wealth Managers. These articles reflect the views and opinions of the authors and may differ from other established authorities.
⦁ Accidental High Yield Stock – “is a company that pays a high dividend yield, even though this was not management’s original intention. The high yield is the result of a steep decline in the company’s stock price…” – Investopedia
⦁ COLA – A cost-of-living adjustment (COLA) is an increase made to Social Security and Supplemental Security Income (SSI) to counteract the effects of rising prices in the economy—called inflation. – Investopedia.
⦁ I made up the part in italics,but it sounds like something SSAwould say.
Supplemental Disclaimers:
This article is informational only and is not investment advice. This is not an offer to buy, hold, or sell investments like securities or insurance products.
Securities and Investment Advisory Services are offered though Toro Bravo Investment Advisors, LLC. Life Insurance and Annuities sold as an insurance broker are not a fiduciary relationship and are not offered by Toro Bravo Investment Advisors, LLC.
Securities or Insurance are not FDIC/SIPC insured and investments contain risk plus could be subject to loss.
Losses could be short term or permanent. Numbers and figures illustrated are hypothetical in nature and past performance is not a guarantee or indication of future results/performance.
We are not affiliated with the Social Security Administration (SSA), Internal Revenue Service (IRS), or any Governmental Agency.
Do not rely solely on the Legal, Tax, or Financial information presented for it may not be suitable for your individual situation.
Consult your legal, tax, and/or financial professional before acting on any strategy or recommendation (i.e. major changes or before initiating the purchase, hold, or sale of any investment or investment strategy). Every individual’s strategy can differ depending on current circumstances and goals.