Economic environment – what it should mean to you

As a Financial Advisor, I've recently had an uptick in conversations. Receiving phone calls from locals throughout the valley and some business owners. In addition, some executives and non-profits have also been openly curious, wondering, "What's going on with the economic environment?" Whether they're current clients or someone I randomly get talking to in the grocery store, regardless, everyone is an individual investor (people just like you and me); folks want to know about what's going on and what it could mean to them and their money. The recent banking implosion has stirred the minds of many. Asking if their money is safe or in jeopardy. Questioning the risk associated with the recent news in the banking sector, fearing the impacts on their net worth... etc., One by one, they eventually asked, "is this something that will affect me?" My answer: If you're lucky, yes! Let me explain.

Investors have weathered volatility for decades, from the floor of the "Wall Street Crash" in 1929, to the dreaded "Black Monday" of 1987's single trading session plummet, through the 'Great Recession' and "Financial Crisis" in 2008. All the way up the summit of the S&P 500's peak during the "winter of 2021," it's important to note the one thing that protected investors and their money throughout all of this and still works today: diversification. Unfortunately, time after time, a "run" on specific investments - i.e., stocks, bonds, cryptocurrencies, mortgage default swaps (or even the latest trend on social media) - eventually lures assertive eyes away from a disciplined strategy. What flashy lure caught the eyes of SVB Bank & Credit Suisse? Bonds. A lot of them. Instead of spreading out broadly, they lumped overweighted assets into a sector directly correlated to interest rate risk. The income from these bonds was attractive. They still are. But when long-term bonds pay a shiny/flashy interest rate, the lurking doom of (the Federal Reserve) pulled the feet out with their attempt to control inflation every time they hiked interest rates and are still poised to continue doing. When liquidation supersedes the bank's "cash on hand," it doesn't matter how much interest you're receiving if the value of those bonds held dips lower with each hike in rates. Here's what I know and what I accept; inflation is here. And it will be around much longer than we want, regardless of what the Fed has anticipated. But there's something you can do to reduce that erosion of your hard-earned money, and it's something you must do for your investments... Diversify.

It's easy to get distracted. I get it. Social media (the latest "Influencer" touting the newest trend), cable news, Hollywood; it doesn't matter where it's coming from, something will always peek its head in when we least expect it. So keep track of your intended destination. If it's growing your investments to a range you can draw from in retirement or building a college savings plan for your child who's now eight, most of our valley is just trying to stretch our budgets to afford a decent family vacation. Regardless of your goal, remember that it should not be jeopardized by a distracting angle in hopes of cutting any of the corners. Putting it all on "black" generally pays the house. Sure, people make significant gains by risking more, but why play a game you're favored to lose with the clock already against you? Spread your investments out. If it's your retirement plan, an individual brokerage account, or "Billy's" 529 plan, allocate your assets to grow, but make sure they're capable of weathering the storm. Because spring is on the way, how about a baseball analogy? Pay attention to the failure of SVB last Friday. Look into what's going on with Credit Suisse but stay focused. Accept it all as a lesson in adversity to the banking sector that you refuse to waste. Of all the clients and friends, I've been fortunate to help, I can't think of one that got to the "hall of fame" by swinging for the fence. Those tedious yet fulfilling singles and doubles get them there, and I can promise that they're also the ones who are the safest and happiest.

Stephen Barber is a Financial Professional and owns a practice in Whitefish called Legacy Facilitators.