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Mind Games

Updated: May 17, 2022

Let's set the scene:

S&P 500: -19%

Nasdaq: -30%

Russel 2000: -30%

Bitcoin: -60%


Things are bleak for investors in the market currently. Many are left wondering if they will ever see their portfolios recover to the values they saw only just 6 months ago. I am hear to tell you, the only thing stopping them from returning to those levels is you.

Back in 2014, a newly hired associate at Fidelity conducted an independent research study on the top-performing portfolios invested through the brokerage. What they found was hilarious, and a bit humbling to many investors.

The conclusion of the study found that the majority of the top preforming portfolios were of investors that were deceased, or inactive. (Meaning they forgot their password, hadn't been on the platform in over 10+ years).

Yep. A dead guy will likely outperform you in the market.

What!? But I read every BonkerBeat blog, watch CNBC 12 hours a day, and check my portfolio every other minute on Robinhood? How can a dead guy know more than me?

He doesn't - but that's why he outperforms.

The reason why I say to you that the only thing stopping your portfolio from returning to the levels it was at prior to this market downturn, is that you are the one who decides whether to buy, sell, or hold. And in times like these, many panic. They sell.

For long-term investors like myself, these times of market turmoil are great. They provide buying opportunities. Stocks are on sale! Although it can be hard to imagine at the current moment, inflation will not stay at 8.3% forever. Interest rates will steady. Investors will remember why they valued the technology and innovation in the most impressive and important companies the world has ever seen at much higher levels than we are seeing now.

But things will take some time to settle out. This is a very difficult economic environment to unpack.

On one hand you have Inflation at record levels, interest rates rising, and stocks falling. On the other, we have one of the tightest labor markets in history, high levels of cash on hand, and consumer balance sheets still in pretty great shape.

I believe the largest driver of the downtrend is US stocks has to do with the rising interest rates being set forth by the Federal Reserve. The rising rates has shored up liquidity, and investors are being forced to reconsider where they allocate their capital.

The decision to raise interest rates is specifically focused to combat inflation, which is at the forefront of every living person in America at the moment. I thought it was interesting seeing even President Biden speaking last week, with the actions, "LOWERING COSTS: and "TACKLING INFLATION" very boldly behind him on the podium. With mid-term elections approaching quickly, the current administration knows it must find a way to settle these concerns as quickly as possible.

So we have the Fed doing everything they can to fight inflation, we have the White House putting forward an increase focus on their policy, and we have a US stock market that is taking a considerable bearish view in any of it working itself out in the near future.

We will not see the results of these decisions put together by policy makers for at least another 6-9 months, as these changes take time to show their impacts in the economic system. The US stock market is a leading indicator for US business performance looking forward, and right now, it's telling us that we are in for a slow down. But a full on recession? I am still not convinced.

Regardless if we see a recession or not, the key for us as investors is to remain invested. Remember why you invested that money in the first place. What was your time horizon? Has that changed? If not, this volatility is nothing to be concerned with. You have time and human capital on your side. Take this opportunity to buy more where you can, and recognize the power of compounding annual interest.

Don't let the mind games of the market and media win you over. Stay calm, stay invested, and stick to the plan.




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