Category: Stock Market
Is This Time Different?June 17, 2022
The Equity (Stock) market by most gauges is now down well over 20% and has entered a bear market. We understand that times like this can be difficult as an investor, and we are here to help you make wise financial and investment decisions. Because we care about you and your financial plan, we want to provide you with some overall thoughts and perspectives on market volatility.
What is the cause of this bear market?
Inflation has surged, the federal reserve is raising interest rates (and reversing what is called QE or Quantitative Easing) and these actions are increasing the odds of a recession. Oil prices are at record highs (we all see this at the gas pump daily), and food prices are skyrocketing – not to mention the war in Ukraine. All these headlines and events may lead you to believe that “this time is different.”
Therein lies perhaps the most dangerous phrase of becoming a long-term successful investor. “This time is different.” If we believe this, then the next thought is, “I must pull my money out of the markets, or at least start preserving cash and stop investing my monthly amount into something that loses money each month.”
This time is NOT different. Recessions occur once every five years on average. While inflation is a problem right now, there have been times where it was much higher. Also, although the federal reserve is raising interest rates, they are still relatively low. Oil supply is still limited due to pandemic shutdowns (and other factors for another time) and demand has surged due to a full reopening of the economy. All of this will work its way out. In our opinion, more oil supply will come, demand will soften, inflation will cool, and the market will realize that the world is not ending. In time, this bear market will end.
This time is not different, if just FEELS different. It always does. In 2008 when banks were failing, housing was busting, and the market dropped over 50% (remember how that felt? I do!) – it certainly felt very different. However, those who stayed the course, added to their portfolios, and had faith in the future prevailed, and this time should be no different. During uncertain times it is good to reflect on time tested principles:
- Give more money away this year to a cause you care about (giving is a step of faith in a God who provides)
- Do not make financial decisions out of fear or worry.
- Think long term – we make better decisions when we think long term
- Add to your investment portfolio, assuming you have a few years until you need the money a drop in the market may be a good opportunity to invest with a long-term perspective.
- As we have talked about in the past, make decisions based on your holistic financial plan that is based on your goals, values, and timeframes – we are here to help review any of these details with you if that would be helpful.
Thank you for your continued partnership, and I wish to close with words from Paul in Philippians 4:6-7; “Do not be anxious about anything, but in every situation, by prayer and petition, with thanksgiving, present your requests to God. And the Peace of God, which transcends all understanding, will guard your heart and minds in Christ Jesus.”
Market Update May 2022May 6, 2022
by Ron Bare
With recent market volatility we know concerns can sometimes arise. We hope this video blog by Ron helps to alleviate any of your concerns and offers you peace of mind. As always, we are here should you like to speak directly with us. Please feel free to reach out to your advisor with any additional questions.
Thoughts on the crisis in UkraineMarch 9, 2022
by Ron Bare
Like you, all of us at Bare Wealth Advisors are concerned about the recent world events, most significantly the Russian invasion into Ukraine. In the days ahead, please contact your team here at Bare Wealth Advisors if you have specific questions on how this affects your personal financial plan. In the meantime, I feel compelled to share some overall thoughts and words of encouragement.
- There will be plenty of blame to go around for this event in the days and months ahead – for now, I suggest praying for peace and protection for the nation of Ukraine.
- We are seeing extreme price movement in food and energy, which is likely to continue. Keep in mind, the US was energy independent within the last couple years. I believe our country has the capability to produce the energy we will need in the long-term. Since Ukraine is a large producer of wheat, we will continue to see increases in our food costs until this uncertainty is behind us.
- In my opinion, Russia desires control and money from both energy and agriculture (mostly energy) and that is what this war is about. In my opinion, Putin does not want to start World War 3.
- Financial Steps to take:
- Live within your means – spend less than you earn
- Give generously to those in need – here is a link to 20 organizations that are helping people in Ukraine: https://www.ncfgiving.com/stories/help-for-ukraine-10-charities-on-the-frontlines/
- Minimize debt
- Think long term – this too will pass. Continue to “work” the financial plan we have put in place. If you are adding to investment accounts, please continue to invest and possibly increase the amount of money you are investing. You are investing into some great companies that over the long term may reward you with good profits. If you have excess cash (margin) in your financial plan this may be a great time to consider buying some of these companies shares.
- Do not fear: Read Matthew 6: 19-34 (read verses 25-27 below)
- V25: That is why I tell you not to worry about everyday life – whether you have enough food or drink, or enough clothes to wear. Isn’t your life more than food, and your body more than clothing? V26: Look at the birds. They don’t plant or harvest or store food in barns, for your heavenly father feeds them. And aren’t you far more valuable to him than they are? V27: Can all your worries add a single moment to your life?”
Thank you for trusting in our team. We are here to serve you and we would be happy to help bring clarity to any questions you have concerning your personal financial plan.
Ron Bare and the entire Bare Wealth Team
Market Thoughts 101February 7, 2022
By Ryan Kurtz
It is January 26th, 2022, as I sit down to write my thoughts on the current state of the stock market. After 3 great years in the market (measured by the S&P 500 Index) in which a $100,000 investment would have grown to almost $180,000, the market is down 8.5% since January 1st. Does that mean the stock market is no longer a good place to invest? Let’s take a deeper look.
What creates volatility in the stock market?
The “market” is just an auction that happens every business day in which investors (owners) in companies buy and sell their ownership shares. If there are more buyers bidding, then there are sellers selling of a company, the shares go up in price. If there are more sellers than buyers, the share price goes down. There are many things that would make people want to buy or sell – a CEO retiring, a new product that investors think is a good idea, profits in a quarter are better than expected, and on and on.
Are we going to see a decline or drop in the market? The answer is yes. When, and how much, I have no idea (and no one else does either, it is just speculation.) Just because the market drops does not mean it is a bad place to invest. It is the nature of this type of investment that is priced by a daily auction. No one knows the future and even when very intelligent people predict what “may” happen to the market, they are often wrong.
Is the stock market still a good place to invest? The answer is – it depends. It depends on what you plan to use the money you invest into the market for. It is typically a good place to invest for someone that has a long-term plan to own the investment. If you need the money you’re investing in 1 – 3 years, it may not be a good place to invest. For investors that have been able to hold investments in the stock market for 10 years or more they would have had an investment that would have provided a good average annual return during most decades. If you only would be able to hold the investment for a year or two, you would have had a 25% – 30% chance of losing money*.
So, what are our current thoughts on the Market?
- The market is a good place to invest for a long-term investor
- The market could be too much risk to take if you are a short-term investor
- Based on our experience and working with many families; the stock market is one of the 3 best investments one should own to create wealth. The other two are real estate and private business.
In closing, our encouragement to our clients is to keep a long-term focus regarding your investment portfolio and understand how these investments fit into your overall financial plan. If you have a good understanding of the investments purpose, timeframe, and needs for you and your family you are much more likely to be a successful long-term investor!
*American Funds, The ICA Guide 2021 edition: Class A shares; MFS Investment Management, Principles of Long Term Investing Resilience
Mid Year Economic PerspectiveAugust 26, 2021
by Ron Bare
It’s hard to believe we are nearing the end of August 2021. As you all are very aware, the past year and a half have presented never before seen challenges and uncertainty. We recognize that often fear and anxiety are the results of this uncertainty. We thought it would be appropriate as we head into the fall to share some important, time tested principles, as well as a few key thoughts on our economy.
- As always, we recommend the best course of action is to be long-term, goal-focused, planning-driven investors. We’ve found that the best course for us is to formulate a financial plan—and to build portfolios—based not on a view of the economy or the markets, but on our most important lifetime financial goals.
- We believe in following a plan with discipline — as opposed to reacting to current events. This offers us the best chance for long-term investment success. Simply stated: unless our goals change, we see little reason to alter our financial plan. And if our portfolio is well-suited to that plan, we don’t often make significant changes to that, either.
- We do not believe the economy can be consistently forecast, nor the markets consistently timed. We are therefore convinced that the most reliable way to capture the long-term return of equities is to ride out their frequent but ultimately temporary declines.
PERSPECTIVE OF CURRENT SITUATION
- The economy continues to struggle with supply chain imbalances, as well as with a historic mismatch between the number of job openings available and continued high (though rapidly declining) unemployment. Financial journalists continue to speculate on when these blockages will clear, but for long-term investors like us, the key is our belief that they will, in the fullness of time.
- There is also the issue of the Biden administration’s drastic tax proposals with respect to capital gains and estates. The best that can be said on this subject is that, as the first half of the year ended, the momentum behind these initiatives seemed to be declining. But the political climate remains as detrimental to capital (and capitalists) as it’s been in quite a while.
- Nonetheless, for investors like us, the most important economic report of this whole six-month period is the fact that household net worth in this country spiked 3.8% in the first quarter of 2021—to $136.9 trillion—propelled by broad gains in the equity market and in home prices. Even more important, perhaps, is the fact that the ratio of household debt to assets continued to fall, and is now back down to about where it was 50 years ago.
- The consumer powers this economy, and the consumer has rarely carried more manageable debt levels relative to disposable income—and has simply never been holding more cash—than he/she does today. In June, the National Retail Foundation raised its outlook yet again; it now expects retail sales to grow 10.5% to 13.5% (that is, $4.44 trillion to $4.56 trillion) year over year. As a result, the retail giant Target raised its dividend by a whopping 32%.
As always, if your situation has changed, or if you would like to speak to one of our advisors, please give us a call. We thank you for your continued trust and confidence in the team at Bare Wealth Advisors and we look forward to speaking with you soon!
Keeping Your Eyes on the GoalJune 28, 2021
by David Denlinger
It is no secret that this past year created a significant amount of uncertainty, fear, and confusion. In times like these, it is very easy to allow the stress and weariness to get the best of us. All the negative headlines and conflicting news sources seem to shake our judgement. Instead of letting fear control our thoughts and decisions, 2 Timothy 1:7 is a good reminder to stand firm, “For God gave us a spirit not of fear but of power and love and self-control.” From a financial standpoint, staying disciplined during uncomfortable times is difficult but crucial to short-term financial wellness and long-term financial success. Here are several guidelines to help keep your eyes on the goal:
Don’t focus on market swings. It is important to have a financial plan and to stick to it through market volatility. If there are changes to your financial situation, please let us know and we can review your accounts to see if we need to make changes, but it is important to not make decisions out of fear or emotion. Additionally, trying to time the market often involves a lot of disappointment and very few find success.
Invest prudently. The natural human tendency is to buy lots of stock when prices are rising and to stop buying altogether when prices are on the down swing. But some stock prices may provide a good value if the market drops, and you will be able to buy more for the same amount of money. When you are in the accumulation phase, the best way to invest is to setup a monthly investment. This removes the emotion from investing and is a proven long-term plan for successful investing.
Increase your savings. In times of stress, it is natural to buy something fun. But no matter how you feel, it is important to follow Biblical principles and spend less than you make. Focus on adding to your savings instead of making large unnecessary purchases due to the stress you may be feeling.
Give Generously. No matter what is happening around us, it is important to continue to give. There will always be people in need and as a nation we have been very blessed financially. Consider giving of your time, talent, or money to those around you. Furthermore, you can consider giving to local, national, and international organizations to increase the impact that you can have.
Hopefully, these guidelines are helpful as you face the challenges of today. The pandemic has touched each of our lives differently and as you continue to steward your finances, we at Bare Wealth Advisors encourage you to stay disciplined and in all things be grateful. Philippians 4:6-7 states, “Do not be anxious about anything, but in every situation, by prayer and petition, with thanksgiving, present your requests to God. And the peace of God, which transcends all understanding, will guard your hearts and your minds in Christ Jesus.”
What is going on with GameStop and how should I respond as an investor?February 9, 2021
As many of you have seen in the financial news within the last week(s), social media forums are having an increased influence on specific shares of companies or precious metals. We have had several of our clients as well as friends and family members ask us to explain what is happening.
For those who have not heard about it, here is a quick background: Hedge funds often have large short positions on companies they expect to decline in share price. To “short a stock”, means to sell it with plans to buy it back later; hopefully, at a lower price. These positions are public as large hedge funds are required to make their holdings known. Recently, forums on some social media platforms have taken notice and leaders of these are encouraging people to buy stocks of a few of these companies to run up the price and cause large losses for the hedge fund managers.
A few thoughts and reminders:
- When you are buying a stock of a company, that company does not receive any money. Stocks (after the IPO – Initial Public Offering) are traded on the secondary market. So, when you are buying a stock, it is like buying a used vehicle – the manufacturer does not get a dime.
- Use caution if your heart is attracted due to a quick gain or fast profit. Proverbs 13:11 says, “Wealth gained hastily will dwindle, but whoever gathers little by little will increase it”.
- Understand how your investment creates wealth. If you are going to buy an investment, make sure you or your advisor knows how it works. In this case, with companies like GameStop, look at the underlying company you are buying, in this case GameStop had 3 years of declining income, increasing debt, and the increasing use of borrowing to fund cash flow. Proverbs 14:15 says “The simple believes everything, but the prudent gives thought to his steps.”
- Consider the ethical side of an investment decision not just the financial side. Contemplate questions like “Am I making the right investment choice if I’m hoping for the demise of another for the sake of personal gain”? Proverbs 24:17 says, “Do not gloat when your enemy falls; when he stumbles, do not let your heart rejoice.”
- Just like joining in partnership with someone in business – know what your exit strategy is. If you plan to get in on trends or investing in individual companies, know what your exit plan is. Do not buy based off excitement with no plan of when to sell after gains or losses occur.
- Seek the counsel of those whom you trust. Be cautious trusting your investment decisions to those you do not know.
There is nothing inherently right or wrong about purchasing stock in a company. However, we do know that every financial decision has more than just financial implications and it is good for each of our hearts to pause and consider the above thoughts before making any investment decision.
Investing Perspective in an Election YearOctober 6, 2020
by Curtis Burkholder
As we enter the fall season with changing leaves and weather, it is easy to feel the world around is changing as well. However, as the writer of Ecclesiastes wrote, “There is nothing new under the sun”. In light of all the changes, we can be paralyzed by feelings of fear as we consider the upcoming election, the nationwide racial unrest, and the ongoing Covid-19 concerns. It is important to maintain a long-term perspective and look at the facts to confront some of our emotions and the pictures we paint in our own mind. It is natural to want to react and wait to invest for a “better time” or when “things don’t seem as scary”. However, as we will look at below, the facts tell a different story.
In looking at historical market averages, the S&P 500 Index has averaged approximately 11% over the past 75 years. This is a time period that covers both Democratic and Republican administrations. If you fast forward 2 months from now, the election will be over. Some people will be happy, and others will be fearful based on the winning candidate. These emotions can lead us to make irrational investment decisions. We need to always remember that it is important to remain invested in the markets and not give in to fear.
A second fact to consider is that you don’t need to like who is President to do well in the market. According to Invesco, some of the best returns historically came when the presidential approval rating was between 36-50%. This occurs approximately 40% of the time. Take a moment to stop and reflect on this – the best returns in the stock market have come when half or more of the country has not approved of the sitting president.
A third fact to consider is that while we may feel this election is more divisive and contentious than in the past, we can look at our history as a nation and find another political disagreement that was more contentious. In 1804, the sitting Vice President of the United States, Aaron Burr, engaged the former US Treasury Secretary Alexander Hamilton in a duel. This duel led to the death of Hamilton. While there are strong opinions on either side of the political spectrum today, none of us expect to see the Vice President (from either party) engage in a duel! As a nation based on freedom, there will always be different opinions and perspectives. We cannot let the political tensions impact our investing decisions.
As always, if there are significant changes to your personal situation, please contact us so we can relook at your plan and adjust accordingly. We do not want to make emotional decisions in reaction to the news, markets, or presidential elections. However, we will make changes as your goals and life situations change.
In conclusion, as we consider where we are as a nation and look to the future, none of us knows what today or tomorrow holds. But we do know WHO holds our future – Jesus Christ. As we look at the past, we can gain helpful perspective. We don’t know who is going to be elected, what the market is going to do, or if there will be a spike in COVID 19 cases this fall. We can take courage and comfort in the words of Jesus from John 14:27 “I am leaving you with a gift—peace of mind and heart. And the peace I give is a gift the world cannot give. So don’t be troubled or afraid.” (NLT)
Market UpdateMay 22, 2020
by Ron Bare
In February of this year, I spent a week in Florida with my family as well as with some of our team from the office. Visiting colleges with our daughter, going to Disney’s Animal Kingdom, enjoying the beach, and attending the annual “Kingdom Advisor Conference” all seem like a distant memory. It is hard to believe that this was only three months ago! While we had heard a few “rumblings” of a new virus during our travels, we saw no masks or any cause for concern, even when boarding our plane on February 23rd.
The equity markets at the time were reaching new highs. The US economy was very strong, with record low unemployment and solid GDP growth rates. Although some were saying markets were beginning to look overvalued, the bottom line was that companies were profitable and were predicting even greater profits throughout 2020.
Then Covid-19 arrived and with it, full-blown panic. The market dropped 34% in 33 days, a record decline. I discussed this in our video blog in late March (which you can find on our website.) Now, two months later, the dust has begun to settle and although the panic has subsided there is still uncertainty about where we go from here. The markets have since recovered much of their decline, however, a large amount of skepticism remains. With this in mind I thought it may be wise to pass on a few thoughts relating to investing success over time:
- When stock prices are going down, the enduring value of the underlying companies is going up. The lower prices go, the more value is to be had at those prices. You understand this in almost every other area of your economic life (we all love to purchase something on sale!) It is essential to apply this same principle to the stocks of American companies we invest in – or you may never become a successful investor.
- Staying fully invested during market declines is the only sure way to capture the entirety of the markets long term advance. It is not possible to consistently sell out of falling markets and buy back later at the “right” time. Most of the market driven news is geared toward market traders, NOT long-term goal and plan driven investors. To the latter, market fluctuations are just part of the process to be rewarded for the long term returns of some of the greatest companies of America and around the world.
- You should never try to make long-term investment strategies out of short to intermediate-term disruptions. We always advise to make investment decisions based on our values and financial plan, not short-term events or emotions. The past few months are a good example. Let’s assume you ignored the market downward collapse of 33 days in late February and March and woke up today, May 15th, and took a look at the markets. Yes, they are down 15-16% from earlier highs, but that is in the range of a typical market correction that happens about once every 12-18 months.
There is the ongoing chance that the markets will continue to drop back due to the uncertainty we still are facing with the Covid-19 virus and economic wake it will leave. If you adhere to the ideas presented above, then these fluctuations should not impact your long-term goal and plan driven investment strategy. Perhaps when we focus on the long term, we not only will make much better investment decisions in the short term, but we also will rest better as we wait for time to pass.
Market UpdateMarch 12, 2020
by Ron Bare
As mentioned in our previous blog, the Bare Wealth Advisors team believe in helping our clients make financial decisions flowing out of a comprehensive financial plan based on your values and goals. However, we do understand that the current health situation with the virus and also the implications of how this effects your financial goals is probably on your mind. With that in mind, we wanted to share a few thoughts on fear and also a few principles we believe.
Since fear levels in our country (and world) are at high levels, we thought it would be good to share some thoughts and principles related to fear and finances. I have heard that the Bible says do not fear (or be afraid) somewhere close to 365 times, one for each day. This is clearly to remind us that our nature is to fear the unknown and the circumstance we may be faced with. I was reminded in our church service this past week to read Psalms 91 (too long to type in this blog – I suggest going to the YouVersion Bible app to read). Reading this and other scripture is a great way to actively combat fear in our lives and for those we care about.
In addition, as we make financial decisions, we believe reviewing a few basic principles can be effective when we live in times of uncertainty. Here are a few to consider:
- God is the owner of all things, including our money (Psalm 24:1). This reminds us we are stewards and should work hard to manage what has been entrusted to us; however, we are not expected to have a crystal ball based on future events that may or may not happen.
- Live within your means and be content with what we have (Hebrews 13:5)
- Minimize the use of debt
- Build liquidity and have some money put back in savings for the unexpected and for income that you may need in the short term (our planning process accounts for these items)
- Think long term – the longer term your perspective typically will help you make better financial decisions. (Think back to the financial crisis of 2008 – 12 years ago, we have recovered well)
- Give generously – personally I believe this to be a very important step in coming up against fear we may have. Fear causes us to hold tight to what we have rather than have an open hand, look to help someone in need or bless a cause or mission you believe in.
In summary, one of our core values at Bare Wealth is Biblical wisdom. We believe that when we manage our lives and finances according to Biblical principles we can experience:
- Contentment under all economic conditions
- Confidence in financial decision making
- Maximize the use of money, our talents and time for what matters most to us
As always feel free to contact our team with questions on your plan/investments or concerns related to what is happening in our world, we care about you and your family.
Also, please pass this on to any family or friends who may benefit from reading this.