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Craig's Corner - Change is Coming

Founding Principal and Managing Director, Craig Robson

Note from Regent Peak: Charles Schwab Quarterly Chartbook is cited in this report and the cited articles may require a subscription to view.

Change is constant and change is guaranteed. When reviewing recent changes we’ve experienced, I believe there are a few things to keep in perspective when it comes to capital markets and the economy. Some things may be easier to predict than others.

Global Pandemic: Since we started the most recent bull market, the S&P 500 is up 92% as of June 30, 2021. That’s over the past 15 months. The previous bear market, prompted by COVID-19, was the shortest on record, only one month.1 This serves as a gentle reminder that it's not easy to predict and/or time the markets.

Let me share with you what is historically more predictable: bull markets are generally longer in duration than bear markets (approximately 69 months compared with 15 months on average), and the returns are greater in magnitude (207% average total return, compared with a -38% average return).2

Blistering Pace of Price Increases: While investors may know that historically inflation has a "dampening" effect on stocks, they may not realize this doesn't hold true when the economy is growing.3 As covered in recent Craig's Corners, the GDP forecasts for 2021 are strong and continue to generally be adjusted upwards. So, if history is our guide, equities may continue to move higher, acknowledging the inflationary pressures consumers are currently experiencing.

Meme stocks: There are certainly those who financially benefited from the whipsaw-like reaction of AMC, GameStop, etc. I prefer the investment approach of time in the markets, instead of, timing the markets. I spoke to this in a recent Craig’s Corner, but it's always helpful to remind investors that from 2001 through 2020 the S&P 500 averaged 7.5%, yet if one missed the top 30 days over that time period they actually lost 1.5%.4

As July comes to a close, I'm looking forward to the remainder of summer (no matter what my grandmother used to say about summer ending after July 4). I know that we’ve got several more weeks of warmth and sunshine before the change of fall and winter approaches. And, no matter what change we encounter, I encourage all of us to take a thoughtful approach towards how it will impact our financial situation.

In closing, I leave you with a quote from President John F. Kennedy, “Change is the law of life and those who look only to the past or present are certain to miss the future.”

Craig Robson

Founding Principal and Managing Director

[1] Charles Schwab, July 1, 2021, “Quarterly Chartbook Q3 2021,” https://www.schwabassetmanagement.com/content/quarterly-chartbook

[2] Charles Schwab, July 1, 2021, “Quarterly Chartbook Q3 2021,” https://www.schwabassetmanagement.com/content/quarterly-chartbook

[3] Charles Schwab, June 28, 2021, “Pressure Drop: Easing Inflation Pressures Ahead?,” https://www.schwabassetmanagement.com/insights/content/pressure-drop-easing-inflation-pressures-ahead?segment=advisor&mkt_tok=MTUzLUhSWS0xOTQAAAF99B8m7HVeoYCjp9VPl7iISlHuGzM-Vw3SqikrbPkXumVnq4Cz9UlFyhppQsLm4JwTk_nySBGZxmNc_6BMQb5yJApKYLFuqzcTHFYyqqD6og

[4] Charles Schwab, July 1, 2021, “Quarterly Chartbook Q3 2021,” https://www.schwabassetmanagement.com/content/quarterly-chartbook