Stay the Course

by Tim Tremblay

The NASDAQ rose 43% in 2023. Photo: Tim Tremblay

Long Term Trend is Your Friend

It is often said that you can only count on two things in life: death and taxes. However, I would like to propose two more. First and foremost, you can count on God above everything else. Secondly, you can count on the stock market to trend upwards over a long enough trajectory. In the short term, smart investors seek market downturns as an investment opportunity, to “get in” at a lower price, knowing the market will eventually rebound. Additionally, analysts can look at the highs and lows of the market to gauge the “health” of other areas of concern, such as politics. We have been through many periods of crisis as a country and still the market continues growing over time. It is prudent to look at market trends with a long view instead of reacting to dips during times of economic, political, and cultural uncertainty.

The best piece of advice I can give is to “stay the course!”

What do I mean by that? In short, “staying the course” means to keep your focus on your personal financial goals. Instead of reacting to bad news in the markets, it is wise to reframe an economic downturn as an investment opportunity and discuss with your financial advisor what he or she believes will suit your financial plan. It is also important to remember that a fine investment plan for one person could be totally inappropriate for another.

Investment Advice

When someone asks me “what should I invest in?” My answer is always, “I don’t have a clue!” I do not know how to advise anyone until I know who they are financially.

I look at your goals, risk-tolerance, needs, where you are on your journey toward retirement, among many other important factors. Once I develop a picture of who you are financially, I can begin the important investment recommendations for your financial plan, such as:

Diversification will always be an important part of the planning process.

A low in the market is often a great opportunity to expand your portfolio with new investments.

Most of your investments will continue to grow if you leave them alone.

Never lose sight of your long-term goals.

Political Winds of Change

When Donald Trump was elected President, many of my clients were nervous and wanted to take that raw emotional response and move out of their investments. I had one client come into my office and tell me, “Put everything into cash; we are going to hell in a handbasket!” I said, “No!  This is not about Trump, it’s about his policies. You should continue with your financial plan.”  A year later we went through an account review, and this client found her portfolio was up over 17%.

It is important to remember to take your emotions out of investment decisions.

Our country has been through many difficult periods of cultural, political, and economic uncertainty that have impacted the market significantly in the past fifty years.  Nevertheless, the market continues a long-term upward trend. I began my career as a financial advisor in 1983 at Prudential-Bache Securities and experienced first-hand the impact a crisis can have on the stock market.

Panic, Uncertainty, and Upward Momentum

Early on in my career there was the Milken and Boesky “Junk Bond” fiasco.

We saw “Black Monday” on October 19, 1987, when the stock market crashed.

There was the “Savings and Loan Crisis” that spanned nearly a decade, from 1986 to 1995.

At the turn of the 21st century our country changed forever when we were attacked on 9/11.

In more recent history, we experienced the most significant economic downturn our country has seen since the Great Depression, lasting From December 2007 through June of 2009, triggering a global recession.

Very recently, the policies enacted during COVID had a devastating impact on the global economy. We continue to recover fiscally in both the public and private sectors as well as globally.

Despite these moments of upheaval, the market continued in an upward direction.  The Dow Jones Industrial Average was approaching 1,000 when I first began my career in 1983. Despite all the ups and downs we’ve experienced over the past five decades; the Dow is approaching 38,000!

Today we face another period of great uncertainty. Americans are worried about the future of their finances and the stability of our country. There is a lot to be concerned about. The political divide deepens every day. Americans stand by and watch their hard-earned tax dollars being spent to protect the borders of other nations halfway across the world while our own border seems to be ignored.

Policies have been enacted in some states, including California, to not prosecute theft of $1,000 or less; skewing the data and “hiding” the inevitable increase in crime that we see with our own eyes. Despite all this, the market has rallied. It is my belief that this is a signal that the market believes “Bidenomics” will end in 2024, making way for better policies.

We shall see.

A Logical Conclusion

When a crisis occurs, look at the facts and use reason and logic in your decision making, especially with financial decisions. Stick to your financial plan unless the facts tell you otherwise. Don’t react to the news. I learned a very valuable lesson on Black Monday, October 19, 1987, when the Dow Jones Industrial Average dropped over 500 points. It opened that morning at 2,247 and closed at 1,739 that afternoon. A wise broker that I had the privilege of working with at Pru-Bache told me, “Tremblay, whatever you do, don’t sell into this market. If anything, you should encourage your clients to buy. IBM just went on sale today!” He was absolutely right.

By the end of 1987 the Dow finished up.  Consider this before making any drastic changes to your portfolio because of something you saw or heard on the news.

If there is ever a time to “stay the course,” it is now.