Wrought Insights for March 12, 2022

In This Edition: Staying Calm Amid Market Volatility, Investment Commentary, and What Makes a Purposeful Life?

Staying Calm Amid Market Volatility

When markets get volatile, it can be tempting to change course. Each crisis, from geopolitical risks to changes in monetary policy, can feel daunting.

But rather than trying to predict what happens next, it’s critical for investors to think clearly and plan for volatility. When faced with uncertainty, remember to 1) keep things in historical perspective, 2) stay invested, and 3) consider building resilience into your portfolio as part of your long-term plan.

Keep Things in Perspective

The table below illustrates the resilience of stock market returns just 12 months after a major selloff.

Stay Invested

Remember: it’s time in the market, not timing the market. The chart below shows how a hypothetical $100,000 investment in stocks would have been affected by missing just a few of the market’s top-performing days over a 20-year period.

Investment Commentary

The breakout of war in Eastern Europe is deeply disturbing from multiple perspectives and will have long-term humanitarian and geopolitical consequences. In the near-term, weaker European industrial production and higher commodity prices are likely to be the primary macro transmission channels. Higher commodity prices would exacerbate supply-driven inflation in the near-term. This is particularly evident in Europe where coal, electricity and natural gas prices have surged from already elevated levels.

Higher energy costs will take a toll on growth – more starkly in the euro area than the U.S. given geographical proximity, deeper economic linkages and energy dependency on Russia. The relative impact may push up U.S. long-term interest rates more than euro area yields. I expect central banks to carry on with policy normalization, and I see a reduced risk of them slamming on the brakes to deal with inflation. Politically, it’s easier to blame inflation on the conflict and argue that monetary policy can do little about it, for now.

Based on these impacts, it’s prudent to further reduce both European-heavy developed market equities and growth-outlook-sensitive global financial equities to fund increases in US equities and commodities.

What Makes a Purposeful Life?

In recent additions of Wrought Insights, I’ve shared stories about finding happiness at work, how experiencing negative emotions and experiences is important to happiness, and I thought it particularly appropriate timing to share this 1977 interview with President Richard Nixon on a purposeful life. This video is 3 minutes long and is worth it. An excerpt below.

And so, while I know there are those who would totally disagree with this and say: Gee! Boy, if I could just be a millionaire that would be the most wonderful thing. If I could just not have to work everyday. I could just be out fishing or hunting or playing golf or traveling, that would be the most wonderful life in the world.
They don’t know life.
Because what makes life mean something is purpose, a goal, the battle, the struggle, even if you don’t win it!