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I know the markets go up and down. I know anyone living from investments knows that as well. I know many people say they plan for it with various strategies.
However, we seem to be living in an environment like never before. Chaos and uncertainty is the norm on a daily basis here and around the world. The stock markets are reflecting it all.
I’ve seen my investments drop and it concerns me even though they are not providing living income.
Are you concerned? Am I overstating the situation?
Jonathan, how about more words of wisdom? Anything unique about the current state of the markets?
Watching the morning news I was struck by this opportunity to stay focused and keep emotions in check. Some of us have already done the exercise of considering the impact of a 20 or 30% equity decline and are aware of any emotional impact, as well as financial impact. “Anticipate the best but prepare for the worst.” I also read this morning that “quality divided-paying companies rarely cut or suspend their payouts in times like this.”
I’ve never been here before, as in this exact place, but it seems there are similarities. This post and comments gave me something to think about. I am reminded of my past and I either experienced all of these things or lived with them:
Stock market crashes,
Housing crash,
Bear Markets,
Lost decade in stocks,
Recessions,
War concerns and the military draft,
Fear of Nuclear War,
Fear of mass extinction because of asteroid impact,
The war on drugs,
Crime and criminal activities,
Violence and personal threats,
Financial hardships, being in debt and penniless at age 48,
Business failure,
Gasoline price peaks including rationing,
Stagflation,
Inflation,
High interest rates on loans including a mortgage above 20%,
Food shortages,
High food prices,
Polio, Measles, Mumps, Chicken Pox, H1N1, Swine Flu, SARS, Covid, etc.
Severe personal injury; life threatening with permanent loss (twice),
Stage IV Cancer, inoperable with 15% survival rate (at best),
Unhappy citizens,
Angry employees,
Cut-throat competition and ungrateful clients,
Civic unrest, Occupy Wall Street, etc.
Political unrest,
Campus riots,
Other riots accompanied by the destruction of nearby sections of communities,
Two hurricanes and rebuilt after one, near misses by tornadoes, other severe storms and weather events on land and on water,
An earthquake or two,
Talk of the imminent demise of Social Security,
Talk of the crash of the dollar,
Fear of job loss,
Mass layoffs and firings,
Loss of parents, siblings, etc.
Marital divorce,
Etc.
I’ve concluded that I have survivor’s bias. Be aware that my list of good and incredible things is even longer!
I had planned on retiring in 2000, but two 50% stock market drawdowns (2000-2002 & 2007-2009) interrupted my plan. On paper my stock investments soared in the late 90s due to tech investments and then after the bubble popped the s&p 500 market went sideways for more than a decade. The market didn’t fully recover(from 2000) until 2013. Due to the AI phenomena, the past few years S&P 500 returns feel eerily similar to the late 1990s due the FAANG concentration. Given the debt we’re carrying as a country, the geopolitical environment, the Fed’s artificial low interest rate environment the past 15yrs causing a mispricing in assets, etc – I think the latter half of the 2020s certainly would lend itself to being more cautious of “high growth assets” and sets us up for a lower returns.
All this to say for anyone in retirement, or about to retire, that derives their income from the equity/fixed income markets – asset diversification, income/expense mgt, “time segmentation or buckets” etc is even more important IMHO. I did eventually retire in 2009 but learned that the ideas & concepts that Johnathan has written about are invaluable and best put into practice early. I put many of these concepts into place after 2009 by educating myself, reading and taking a couple of classes. And more importantly, luck was also on my side given that I had the financial income level to set aside the necessary assets.
But I say this with great appreciation for anyone reading the HumbleDollar content, thank you Johnathan for creating a forum and an educational platform whereby people who want to be informed, educated and can share their life and economic journeys. Life’s experiences hold the most valuable lessons.
“However, we seem to be living in an environment like never before.”
Has there ever been a time when that was not the reality?
Dick, I share your concerns. What’s different about this compared to 2008? I am close to retirement. I know the stock market should eventually rise again but things are different now, aren’t they? We have never had such an isolationist government. America is losing it’s standing in the world economy. Tariffs, really? Federal lay-offs, using vitamin A to “cure” measles, leaving NATO? And Social Security is being threatened. Forget the politics of it, look at the current policies that are the current reality.
Forget about the economy, to me the question is: Can our democracy/economy rebound?
Your confusing perceptions with things actually being markedly different. Consider that both Clinton and Obama had their own DOGE like initiatives, with the exact same goals. But we get the scalpel to chainsaw analogies, because they can’t say we share the same goals, but we want control over what gets cut, then you’d reject it immediately.
Why do you think it is that when there were 667 measles cases in 2014 no one discussed it?
What they leave out often reveals as much as they report
“Things are different now”. Isn’t’ that what is said every time there’s a shake up in the market.
“Folks, there’s nothing to worry about!” And other famous last words 😂
I hope you are right and I am not an expert on American history. But did any prior shake-ups involve the US trying to take Greenland, declaring Canada the 51st state, taking over the Panama Canal or the “Gulf of America?” Please convince me I am wrong.
No can do. And things are different.
I’m pulling back into MM. I don’t need the double whammy of today’s politics and my investments.
Folks, consider sleep and monitor your state of mind.
Having grown up in England I am certainly no expert on US history, but I have been reading that other Presidents wanted to take over Greenland, and certainly, at one time the US owned the Panama canal. Wasn’t there once a war over Canada? (Ah yes, 1812.) Not that I am in favor of any of this, but a greater US security presence in Greenland is not in itself a bad idea, just there are better ways to go about it.
I am much more concerned about tariffs, the erosion of the separation of powers, and freedom of speech. I am somewhat relieved to be a naturalized citizen rather than a green card holder, but only somewhat.
Meanwhile, I have not changed my asset allocation, which is a moderate 50% in stocks.
Update: I am gifting an opinion piece from the NYT on early relations between the US and Canada.
Yes I am concerned. But not about the markets..
I’m glad to hear there seems little concern even among those folks living off investments. More power to you. I would be stressed out if it were me no matter how investments were arranged.
I appreciate your empathy, Dick. My wife and I are retired and live off Social security and our investments. I dislike chaos as much as anyone else, but it is futile to worry about the markets. I focus on what I can control, and so I have adjusted my asset allocation to match my personal risk tolerance. I shifted a while back to 50 Stocks/50 treasurys of 0-5 years maturity. It is a compromise between future growth and protection of our wealth. I sleep well at night and will rebalance when appropriate.
2025 so far….is not chaos. Now I am not calling you wrong or a liar….you certainly are neither. You are lost in the forest because you are standing too close to 1 tree.
Here is a short list of FAR more chaotic times for the United States.
-When the capital of the US was stormed.
-When the world shut down in response to a new virus.
-When banked melted down in 2007-08.
-When planes hit the world trader centers (plural) and we invaded 2 countries after.
-When the markets melted down from overvaluing the internet
-When school shootings started to be come a norm
-LA Riots in 1992
-Black Monday in 1987(DOW dropped 22.6% ….in a DAY)
Then we have MUCH bigger historic and disruptive events
-Mass inflation in the 70’s-80s….DOUBLE DIGIT mortgages!!!!
-Oil shortages
-Vietnam and a draft….you literally got a piece of mail and were shipped halfway around the world with a gun to fight in a brutal and confusing war.
-Cold War – every scared senseless a city leveling bomb could be dropped on them
-WW2 – the death toll and life disruption of all involved is UNIMAGINABLE. NO ONE ALIVE TODAY under 95…has ANY idea.
-Great Depressions….people literally put signed on their kids “please take them, I cannot feed them”.
-WW1
-Pre Industrial revolution…..every day….disease, filth, rough rough standards, working 70 hours weeks was the norm
-Civil War.
And so on.
This is not chaos. We are all waking up and doing our regular routine, seeing loved ones, speaking freely, eating enough and living.
This is discomfort. Mild discomfort.
No, there is nothing on that list as horrific as what tRump,Muck and the GOP are doing to our democracy, and all the institutions we rely upon right now.
And you know what the world before those events looked like? It looked like what we see today.
Not here, but you are missing the fundamental issues i think.
The market will come back. My lost golf balls won’t.
I once had a hole in one (once) and won a car. On the next hole i used the same ball and drove it into the woods. Still regret it.
That’s fantastic winning a car. Next time you get a hole in one, you should keep the ball.
That’s what Connie said. 😃
Richard, I always look forward to your writings that challenge our thinking. But, maybe I should be looking forward to Connie’s articles instead 😉
Not concerned. Go out and play.
If you are that concerned then your asset allocation isn’t set correctly.
When did chaos and uncertainty stop being the norms. Never forget Ben Graham’s description of the stock market:
“In the short run, the market is a voting machine but in the long run it is a weighing machine.”
I’m not concerned, I expect Mr Market to go thru periods where he’ll drive prices down too far (as I suspect he’s driven up the Mag 7 too far up).
Do you think this is scarier than the banking meltdown in 2008? To me this looks like small potatoes compared to that.
I love a good crash, I always go on a buying spree.
As the famous line from the Lion King:
“I laugh in the face of danger. Ha ha ha ha!”
And from the Princess Bride:
“We’ll never survive.”
Westley replies:
“Nonsense. You’re only saying that because no one ever has.”
“Let me explain….No there is too much. Let me sum up.”
It is “inconceivable.”
Princess Bride: My family’s favorite movie of all time. Hasn’t aged at all. “As you wish, my Princess.” “My name is Inigo Montoya. You killed my father. Prepare to die.,”. And who can forget “Mowriage”? Thanks for the reminder. 😂
Dick, You’re a veteran. Sooner or later investors who have seen their portfolio surge in value will remember a harsh market fact. Something always happens to rise up and sweep away unrealized gains. As Adam and Jonathan Have often written, it’s not always what we may have expected.
The only certainty is uncertainty. Few people are disciplined enough to sit tight.I have experienced some Maalox Moments, But if we have a well balanced portfolio, and can control our emotional swings, we may just play the winning hand. This from an eternal optimist.
What you say is logical, but I always wonder how I would react if my portfolio was our source of income. It would not go well. I’d need a straw for the bottle of Maslox.
There you go, And how about some of those chocolate covered 🍒 cherries you’re so fond of.
I thought your income exceeded your expenses, so why are you concerned? Also, what did you do in 2008-9?
As I said in the post I am not living off of investments. In 2008 I was working. My onevconcern is I don’t like seeing things go down and I want the maximum for our children. I know a questionable concern.
Markets go down as well as up. If you don’t like that reality you’re not really cut out to be an investor. Your children have a longer time horizon than you so even though if your portfolio is “down” (against what measure I don’t know) when it gets passed on they can hold (or replicate) and capture the recovery.
Modern reality is people do have to drawdown against a retirement portfolio so more people are having to learn to be stoical about market downturns assuming they have sensibly provided for shorter term expenditure needs in less volatile assets. Or they can, of course, annuitise (or part annuitise) for more security.
I’m pretty strongly against forced annuitisation not least because it creates winners and losers based on the particulars of the equity and bond markets at the time e.g. you could have to convert equity savings at a low point to an annuity when annuity rates were also historically quite low.
It will be okay, as will your children. It’s only money. Stay the course.
Remember: don’t just do something, stand there. Aren’t you one of the people who looks at their investments every day? Try not doing that. Also, breathe.
“ … Also, breathe “
Now you sound like my personal trainer.
I’ve been too lazy to do anything major stock marketwise for 30 years or more.
And I love your quote from Jack Bogle.
Agreed Taking a walk outside helps a lot too, weather permitting. You can’t put a price on a beautiful day.
Rest easy. Your children have even more reason to be patient about your investments than you do.
The music hasn’t stopped yet.
I’ve definitely stopped listening to it at this point though…
There is, without a doubt, lots of uncertainty. But to judge by the relatively modest stock-market drop, investors collectively aren’t all that freaked out. In fact, the decline is surprisingly small given the richness of U.S. stock market valuations and the availability of reasonably attractive yields in the bond market. All this could change if a recession seems likely. But for now, based on the stock market’s fairly small decline, investors don’t appear to be too alarmed by all that’s transpiring in DC.
Oh, I’m alarmed all right. But as you say, not about my investments.