Don't Wait
The waiting is the hardest part
Every day you get one more yard
You take it on faith, you take it to the heart
The waiting is the hardest part
Yeah, the waiting is the hardest part
The Waiting by Tom Petty and the Heartbreakers (1981)
In brief:
Thankfully bear markets don’t last forever, we’re 288 days into the current one, since 1928 they have lasted on average 289 days
Stock market declines of 25% are historically followed by strong multiyear rallies
Our economy is estimated to be growing at a rate of 2.9% (better than the average over the past decade)
The U.S. jobs market remains strong with the unemployment rate at 3.5%, a multi-decade low
Bank of America CEO reports that U.S. consumers are still spending despite inflation
Delta American and United Airlines all reported better than expected earnings as the post pandemic travel boom continues
Watch: Professor Jeremy Siegel, the ‘Wizard of Wharton’ (author of Stocks for the Long Run) the Fed has overtightened and will be forced to reduce rates
Despite the positive data points listed above, we remain in the grips of a brutal bear market. According to analysts at BofA, the classic “60/40” portfolio (a portfolio made up simply of 60% S&P 500 index, 40% U.S. bond market index) is on track for its worst annual performance in 100 years! Where do we go from here? In the short run, nobody knows. But historically, a 25% drop in the stock market is followed by a strong multi year rebound. According to Goldman Sachs (see below) the market has averaged a 27% gain one year following the end of the bear market. Over the course of 5 years, (again, following the bear market) stocks nearly double, rising 93%. Of course, past performance does not guarantee future gains, but the evidence shows that history is on our side.
We view this bear market as a buying opportunity for patient investors. We continue to seek companies that stand to benefit from our favorite themes (or mega trends), Global Aging (genomics, immuno-oncology, medical devices/pharma), Digital Revolution (disruptive technology), Global Growth (fast growing markets overseas), and Cash Flow (income from dividends and bond interest).
“…according to our long-term valuations, the market has overcorrected to the downside and is trading deep into undervalued territory…the current level of undervaluation is the greatest discount to our long term, intrinsic valuations since the start of the pandemic…on a longer historical time frame, there have only been a few other instances when our price/fair value metric had dropped to similar levels. In our view, we think the market is overly pessimistic…”
-Morningstar (U.S. Stocks Fall to Rare Undervalued Levels, 9/30/2022)
It’s been well documented that we can’t time the market. It’s ‘time in the market’ that compounds wealth. We don’t know when the bear market will end, and we have no idea when the market’s ‘best days’ will come. But missing those ‘best days’ will have a profound negative impact on your returns, as demonstrated here by Putnam (see below). Over a 15-year period, by missing the market’s 10 best days, your annualized rate of return goes from 10.66% per year to 5.05%. It’s the difference of doubling your money every 7 years vs 14 years.
source: Putnam (Time, Not Timing)
If you have time and cash (that you don’t need for bills and large expenditures) I believe now is a great time to accumulate high quality companies selling at a deep discount. Don’t wait for the bear market to end before buying, by then the bargains are gone. Cash is earning you a negative rate of return after you account for inflation. Don’t wait to learn how much you need to sustain you and your family for the years and decades ahead. Don’t wait to learn how longevity is a far greater risk to your retirement than the stock market. Don’t wait to address your will and trust and medical directives. Don’t wait to call your parents or friends, some of whom may be lonely. It’s not what you have, it’s who you have.
We’re here to help.
Thank you!
-randy
The opinions expressed in this newsletter are for general informational purposes only and are not intended to provide specific advice or recommendations for any individual or on any specific security. It is only intended to provide education about the financial industry. To determine which investments may be appropriate for you, consult your financial advisor prior to investing. Any past performance discussed during this program is no guarantee of future results. Any indices referenced for comparison are unmanaged and cannot be invested into directly. As always please remember investing involves risk and possible loss of principal capital; please seek advice from a licensed professional.
Hamilton Wealth, LLC is a registered investment adviser. Advisory services are only offered to clients or prospective clients where Hamilton Wealth, LLC and its representatives are properly licensed or exempt from licensure. No advice may be rendered by Hamilton Wealth, LLC unless a client service agreement is in place.