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Looking Beyond

Looking through different lenses can either take you out of focus or help you see things from a unique perspective. As we open our latest investment statements it is difficult to draw any positive thoughts and your reaction may depend on which lens you are looking through. Investors thrive on information, which often makes them feel the need to act, but investors need to keep in mind that this short-term information only provides context to the current environment but does not change the strategy or plan they have developed for the long term. Although you have a plan or strategy which may not be working optimally now, do not abandon it. Every strategy goes through time periods that can be more challenging than others. Abandoning it may make you feel you are doing something now but could derail your long-term goals for the portfolio.

Media outlets are feeding up to the minute sound bites to investors - what to do, how to react, and how they think things will play out. This is looking through a short-term lens, even though their financial plan is structured through the long-term lens. We label these media sources as noise. It does not help individual investors. Think about it: they know nothing about you or your financial situation, yet their opinions may cause investors to react. Looking through the lens of a financial advisor who understands the investor’s goals and objectives enables the advisor to help the investor sift through all the noise. 

It is always interesting to advisors how media outlets talk about the short-term noise as if it is Armageddon. History continues to remind us that it is not the short-term that makes any of us money, but rather the long-term. We acknowledge that inflation exists today (the past twelve months) and has been hurting many households, but as grueling as it has been for many it is not Armageddon. It is unfortunately normal. 

Earlier this year we wrote that the Federal Reserve coined the phrase, “Inflation is Transitory”. The Oxford dictionary definition of transitory is “not permanent”. However, investors are reacting as though the current bear market is permanent. By using historical data as a guide, we can easily see that no market correction or advancement is permanent. The market goes through cycles. We should ask ourselves why investors react when markets are temporary, not permanent. Media outlets create a disabling effect on financial success by directing investors to focus on the short-term rather than the long-term. These outlets feed viewers and listeners with speculation on the impact of outcomes rather than education. This in turn creates anxiety. 

To understand anxiety as it relates to volatility, we need to understand how our brain filters all this information. The brain has two decision-making systems, the emotional and the rational system. When we are calm, it is easy to set emotion aside and focus on logic. However, when we are anxious the emotional system overwhelms the rational system and derails the ability to reason because emotions are high. [1]

It is normal to be concerned about market fluctuations. However, you need to look back and ask yourself if this is the first-time markets have declined and what transpired after a decline. No one knows when a market decline will turn positive, but historical data has shown us that markets are resilient no matter the crisis. Let’s look at the information on the next page.


Good Years Outnumber Bad Years: [2]

S & P 500 Index (1926-2021)

                                                                   Average Annual Return: 10.60%

During times like these we adhere to our philosophy of remaining diversified. Volatility creates the potential for capital gain distributions at the end of the year. We are in the process of harvesting losses and will continue through the remainder of the year. This strategy of realizing losses can be used to offset some or all capital gains that may occur in 2022. 

As investors it is not easy to weather these volatile times, so do not be influenced by your emotions to become reactionary. Look back at the last down market and the progress you have made. Keep in mind that a permanent loss happens when an investor sells a temporary loss. Stay focused on the plan and remember, that is the lens that you need to look through and beyond. 

We welcome your questions or concerns to guide you through these turbulent times. We are confident that the future will be brighter as we navigate through all the noise. We appreciate your trust and confidence. Thank you for understanding the plan that you have in place. 


Thomas L. Menzel, CFP®                                             Laura Biermann, CFP®
President                                                                       Vice President



IMPORTANT DISCLOSURES:  The opinions presented in this communication are subject to change without notice and no representation is made concerning actual future performance of the markets or economy.  Information obtained from sources is considered reliable but is not verified. The research and other information provided herein speak only as of its date.  We have not undertaken and will not undertake any duty to update the research or information or otherwise advise you of changes in the research or information.  Performance information presented is not an indication of future results and index data is provided for market reference purposes only.  This is not an offer to buy or sell or the solicitation of an offer to buy or sell any security/instrument or to participate in any particular trading strategy.  This document is the property of Legacy Financial Advisors and is intended solely for the use of the Legacy client, individual, or entity to which is addressed.  This document may not be reproduced in any manner or re-distributed by any means to any person without the express consent of Legacy.  This material is for educational purposes only.  Mis-transmission is not intended to waive confidentiality or privilege.

[1] Hartford Funds, “Why Logic Doesn’t Work With Anxious Clients” Barbara Kay, MA, LPC, RCC, TIPC September 15, 2022  

[2] Hartford Funds “It’s Easy to Forget the Market’s Good Years”