The 2020 Mid-Year Financial Review

2020 Mid-Year Financial Review– What a Rollercoaster of a Year!

By: Chris Merchant, CFP® BFA®

What a rollercoaster year it has been.

Flashback to the beginning of 2020— the economy was doing well, the stock market was hovering at all-time highs and most economic indicators looked good. Within a few months everything changed. The pandemic hit, we saw millions filing for unemployment and there was a global disruption to almost every aspect of our daily lives. Now that many industries are reopening, we are seeing broken supply chains and backlogs that may last months. Consumers are seeing shortages of products from kitchen appliances to bicycles. The virus appears to have peaked in many areas, but there are expectations that some places may have secondary outbreaks to varying degrees. The S&P 500 and the Dow Jones Industrial Average are down for the year but are currently recovering from the lows of March and April and could still reach their previous heights. What a wild ride it has been!

So, what lessons can we learn? 

First, when you’re in the middle of a bear market, regardless of the cause, it feels as if it’s never going to end.  But they always have, and the bull markets to follow have generally lasted longer than the bear markets.  Gains have often been the strongest right after the market bottoms.  Over the past 70 years, the average bear market has lasted 14 months and has resulted in an average loss of 33%.  The average bull market has lasted 72 months, and the average gain has been 279%.

The second lesson is that as much as we’d like to avoid it, volatility is a normal part of investing. Although we can’t predict it, we can prepare for it.

For those of our clients who are retired or are retiring soon and are using NextPhase™, you probably felt pretty good about your decision to follow this process. This shows the importance of protection for the money you need for your upcoming retirement years. Many of you reached out to let us know how good it felt to have the peace of mind knowing you were prepared. For those clients who are in the accumulation phase, this shows importance of staying invested and sticking with a long-term strategy. For many of you, this will not be the last major economic event in your lifetimes. But we know that to be successful you must stay the course. 

At HCWM, times like these remind us that we have a special group of clients, both those who are retired and those who are still accumulating for retirement or other goals. Both groups remained focused on their long-term investing goals. Having lived through other bear markets, I know the toll that times like these can have on investors’ confidence and peace of mind. At HCWM, we received phone calls during the pandemic, but mostly they were calls from our clients reaching out telling us how thankful they were that they prepared. That is unique, and I expect is much different than what many other firms experienced from their clients. We’re grateful to be partners with you in your future!

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