2022 Has Started Out Very Rough for Investors

2022 Has Started Out Very Rough for Investors

May 11, 2022

2022 has started out very rough for investors with both equity and fixed income investments producing negative returns as of this writing.  Core bond investors have experienced one of the worst starts ever to begin a year. 

Historically, a mixed allocation approach of stocks and bonds has worked well for investors, however with both equity and fixed income markets being simultaneously down so far this year, investors may question the validity of the allocation concept.  Unfortunately, even with historical result information, allocations are not 100% certain all the time.

Like all markets, fixed income investing involves risks and, at times, negative returns (although negative fixed income returns tend to be much smaller than negative equity returns). That said, as painful as the start to this year has been, it isn’t all that uncommon to experience negative returns for both equity and fixed income markets at the same time. In fact, since 1995, nearly 15% of monthly returns have had both negative equity and fixed income returns*. Again, it doesn’t make the experience of a seeing negative performance of a diversified portfolio any less painful this year, but we believe it also doesn’t change the argument to own a portion of core bonds in an allocated portfolio that is suited to an investor’s objectives.

Something happens all the time that impacts the financial markets.  Inflation, wars, pandemics, supply chain issues, and interest rates are some of the current topics capturing much attention.  Great companies are run by very smart people who figure out ways to adjust as needed to continue profitable operations and paying dividends.  The stock prices of well-run companies quite often rise and fall with the markets.  A rising tide and lowering tide both lift and lower all boats.  The managers we hire continually monitor the companies our clients own, making sure they are managed well.

Getting caught up making decisions because of short-term (a few months or even a year or two) gyrations of the markets usually diminishes the net results (over the long-term) of investors that do not have a financial plan in place.   Those that act upon well thought out and designed financial plans typically fare better than investors that react to current news and events.

Take heart and know that money "lost" in all the temporary equity market declines and corrections is eventually returned but is most likely returned to others who are long-term investors with faith in the future, patience, and the discipline to continue working their long-term plan.  

Paraphrasing this quote from Warren Buffet is good to recall during times like this.  “The stock market is a very efficient device for transferring money from the impatient investor to the patient investor”.  Hopefully you will find this information to be beneficial and assist you in keeping patient with a balanced & realistic outlook.

Content prepared by Ron Ring, President

´╗┐Ring Financials Services, Lexington KY, 40503

* as referenced in 3/21/22 LPL research commentary “In Defense of Core Bonds”

Securities and Advisory Services offered though LPL Financial, a Registered Investment Advisor. Member FINRA/SIPC

The opinions voiced in this material are for general information only and are not intended to provide specific advice or recommendations for any individual.  To determine which strategies or investments may be suitable for you, consult the appropriate qualified professional prior to deciding.