Brace yourself

It’s that time again – time for account statements to roll out to investors. Two words: brace yourself.

The end of September is fast approaching. And that means whether you receive monthly or quarterly investment statements, yours should show up in a mailbox – or inbox – in the next few weeks.

Unless the markets radically change in the last few days of September, your statement won’t look pretty.

Why’s that?

Because as opposed to 2021, when nearly every investment class went up, no matter what it was, this year is the exact opposite. It’s hard to find an investment that shows a positive return for 2022.

Unless you were invested in energy companies or utilities or certain commodities, the year-to-date returns you see on your next statement will likely have negative signs in front of them. Most U.S. stocks – negative. Most international stocks – negative. Bonds of all varieties – negative. Bitcoin and other cryptocurrencies – negative. Even gold, which is supposed to perform well when inflation heats up – negative.

Making matters worse, the end of September is lining up to be the lowest point many investments have traversed all year. That means the values you see on your next statement are likely to be the lowest values you have seen all year, too.

The U.S. stock market is down about 22 percent in 2022. The U.S. bond market, which usually represents the conservative piece of investment portfolios, is down nearly 14 percent this year.

I suspect when many investors open their September statements, one of the first thoughts will be, “I think I need to make a change.”

But that couldn’t be further from the truth if you already had a sensibly designed portfolio.

Keep in mind, a sensibly designed portfolio does not equate to a portfolio that never shows losses. The only portfolio I can think of that can deliver that type of performance is a bank account. And good luck meaningfully growing your money over time in any type of bank account.

Just because your stocks and bonds may show losses, it doesn’t mean you should kick them to the curb. Over time, stocks will perform admirably, and bonds will likely at least keep pace with inflation. Stuffing your retirement savings in a bank account or under a mattress has no hope, I suspect, of matching the performance of stocks or bonds over the next five, 10 or 20 years.

Take bonds, for example. Yields are finally reaching a point where they matter. For the last few years, you felt lucky if you received a yield over one or two percent. Today, you can purchase safe government bonds that yield over four percent.

That’s a great thing if you are in or about to enter retirement. You now have an opportunity to park the conservative piece of your portfolio in an investment vehicle that will give you some bang for your buck.

Keep in mind, inflation is still chugging along higher than everyone would like, so finding bonds that outpace inflation is still difficult. That can’t last forever. The Federal Reserve appears poised to squash inflation – a problem it helped create, unfortunately – no matter what it takes. If the Fed is successful, there is a real possibility that today’s bond yields will at least keep your conservative investments on par with inflation.

Remember, the reason stocks and bonds produce attractive returns over time is because they have risk associated with them. And risk is rearing its ugly head right now across the investing landscape.

Even if it gets worse from here, rest assured it won’t last forever. We’ve seen markets like this before. They always get better. This one will too.

But it wouldn’t hurt to sit down before opening your next statement.

Justin Lueger is President of Invisor Financial LLC, a registered investor adviser firm in the State of Kansas. All opinions expressed are his own and should not be viewed as individual advice. He can be reached at justin.lueger@invisorgroup.com.

This column is paid for by Invisor.

 

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