Our 4 Core Beliefs of Investing

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Sep 01, 2020

By Tory Meiborg, President and Partner at World Trend Financial

Tory MeiborgAs a result of the economic shutdown, US stock markets fell dramatically in March. From its intraday high on February 19, 2020, the S&P 500 fell 35.6% to its intraday low on March 23, 2020. In a little over a month, the most widely followed US stock index lost over 1/3 of its value.

Since that time, the scope of the pandemic has actually gotten worse. Some estimates are that 40% of small businesses that had to close during the pandemic will never re-open. Job losses reached all-time highs and the unemployment rate remains above 10% as of the last report. Throw in ongoing trade disputes with China (the world’s second largest economy), a historically unprecedented peace-time Federal budget deficit and the uncertainty of an election in a few months, it would be reasonable to assume that markets would have continued to struggle.

But despite all of the doom and gloom, despite all of the ongoing problems and despite all of the headwinds facing our economy, the S&P 500 not only recovered the losses suffered from February 19th through March 23rd, it closed with a new all-time high on August 24th.

While seemingly unexplainable, we believe the recent market activity has reinforced several key beliefs:

  • The economy is different from the stock market. The stock market is a forward-looking instrument while economic measurements tend to tell us what happened in the recent past.
  • Do not try to “time” markets…Ever! Quite simply, it rarely ever works; and in most cases, proves to be more harmful than helpful.
  • Have an investment plan and do not let short-term market events move you away from that plan.
  • If you have short-term needs, do not invest those monies into equities. For those clients that have been with us for any length of time, you know we believe near-term means anything under 5 years.

Existing clients have undoubtedly heard us express these beliefs on a number of occasions. And during times of extreme uncertainty, these words can often ring hollow. But time and again, they have served us well. While we are relatively certain that additional trying times lie ahead, we believe these four core beliefs will serve us well going forward.

If it has been some time since you last reviewed your plan, now is an ideal time to reach out to your advisor to do so. While the pandemic limits our ability to meet face-to-face for the time being, we are always available for video or teleconferences. The investment advisor representatives at World Trend Financial can be reached at 319-364-3041 in Cedar Rapids, or 319-339-4884 in Iowa City.