Quarterly Update with Jim Hagerty

Principles of Wealth: Episode 2

In the second episode of our Principles of Wealth, Jim Hagerty, our CEO, came back to the show to share a brief commentary on the past quarter of market performance. Jim has a skill for pulling out really key takeaways from the past and helping us apply it to next steps. Jim shared his latest take on the markets as he reflects back on lessons learned in the third quarter and plans ahead for the final stages of the year.

Here’s what he had to say…

It’s interesting to look back at the third quarter… the market measured by the S&P 500 or the Dow Jones more or less finished where it started, and the same could be said of the bond market. But a lot of drama as it climaxed with a swoon in September period during which stocks broadly fell about 5% and bonds also declined.

That has aroused a lot of concerns as to what might be next.

People are keenly aware of factors like inflation, which certainly seems to be percolating. So the September swoon aroused a lot of worries. Our thinking is that it’s very difficult to predict markets over short periods of time. Is this swoon going to continue in October? Is it the beginning of a more severe bear market? Are these inflation pressures going to last throughout the next year or longer? It’s very difficult to predict those factors with any precision.

Always be risk aware

We think this just highlights the importance of always being risk aware. Don’t wait for a September swoon to make you think about risk and the risk of your portfolio. You should always be aware of risks, and that should be factored into investment policies around asset allocation, balanced diversification, and cash planning. You should be mindful of those things all the time and not just alert to them after a market decline.

Think long-term

The other thing I think it highlights is the importance of thinking long term. Over the last 30 years, the stock market measured by the Dow and S&P is up tenfold, and that may seem stupendous, but it works out to about an 8% annual growth rate. And that in turn is about equivalent to the growth rate of corporate profits and dividends during that period of time. So for a long term investor, that’s what matters, and that’s Bartlett’s north star. Stock prices are going to parallel business performance.

Be invested

And related to that, you have to be invested. So, events like September can tempt people toward market timing – the idea that perhaps you should get out, wait till things clarify to get back in. It’s very difficult to pull that off with any precision. We have a favorite saying that it’s not market timing, but it’s time in the market that’s going to determine your long-term success. So those would be my key takeaways, just always being risk aware, always thinking about safeguards in your portfolio, appropriate balance, appropriate diversification. If you have those things in place, it really allows you to think long term, which is the secret to investment success over time.

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The information in this podcast is educational in general in nature and does not take into consideration the listeners personal circumstances. Therefore, it is not intended to be a substitute for specific individualized financial, legal or tax advice to determine which strategies or investments may be suitable for you. Consult the appropriate qualified professional prior to making a final decision.

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