APW Investment Committee - February 24th, 2022
Current headlines along with recent stock declines are definitely spooking investors. The Russian aggression in Ukraine, the Federal Reserve signaling rate hikes, and already multi-decade high inflation readings are certainly reasons for concern. With that said, we believe that valuations are approaching healthier levels in the US and are attractive in international markets. The Russian invasion of Ukraine is a terrible tragedy, but unfortunately, we have been through many, many of these kinds of global crises before. Despite conflict and pandemic, and terrible political decisions, and a litany of other challenges, the human spirit of innovation and resilience marches on, and as a consequence, the financial markets continue to grow. As long term investors we must keep our eyes on the opportunities that lower prices represent, regardless of the short term reasons.
You may be wondering if this is the right time to step into or stay in the markets with so much uncertainty. The problem we face as investors is that the uncertainty is what allows prices to fall to begin with. Waiting until things “return to normal” is one of the greatest investing mistakes we can make. Very few people can move fast enough when the market reverses course and missing key days can have a massive impact on long-term results
Many of the most successful companies in America are currently trading down 20% - 30% off all-time highs. And as we mentioned in our last quarterly commentary, many of the “pandemic stocks” have given up most or all the gains they made over the past two years even though their revenues are significantly higher than 2019.
International markets are in some cases downright cheap, trading at a huge valuation discount to US stocks even though earnings are expected to grow about the same in 2022.
The nature of investing is that the very hardest times to risk your money are the very best times in retrospect. As advisors, it is our job to remind you that you are not trading. You are investing. We won’t always catch the bottom and be instantly validated by our courage. Sometimes you invest with the market 10% down and it falls another 5%. But the truth is that that 5% extra down (while debilitating at the time) is long forgotten 3, 5, or 10 years from now, when the portfolio is substantially higher. We can of course, never guarantee such an outcome. We can only be reminded by every single other crisis in the past 100+ years of financial markets. We encourage you to talk with your advisor and look at how markets have performed through various crises in the past. And more importantly, be reminded about the timeline of your own goals and needs for funds. Nothing beats a sound financial plan at times like these!
Austin Private Wealth, LLC is a Registered Investment Adviser. Advisory services are only offered to clients or prospective clients where Austin Private Wealth, LLC and its representatives are properly licensed or exempt from licensure. Past performance is no guarantee of future returns. Investing involves risk and possible loss of principal capital. No advice may be rendered by Austin Private Wealth, LLC unless a client service agreement is in place.