When you fall off a bike and sustain an injury, it might be something you can see – like a scrape or a bruise. Or the injury might be internal. Either way, it hurts.
However, the body’s healing mechanisms come into play nearly as soon as the injury occurs, working to get you back to top health in due time. You might suffer longer than you’d hoped to, but healing is a process, and a full recovery takes time. Sound familiar?
The past few months, stocks and bonds have experienced quite a bit of pain as they adjust to inflation concerns and fears of a recession, as well as turmoil in Ukraine, earnings, and the like. Last week, stock markets saw a lot of volatility – including two days of ~5% up or down – but for the week, the S&P was only off 0.2%. It didn’t feel like it though.
The markets are digesting A LOT of information right now, hence the higher-than-typical volatility we’re seeing. And although healing is the path we’re on, it’s still a process that takes time. Some high-flying stocks have returned to more realistic levels, thus right-sizing the value paid for earnings of stocks. Bond prices are declining but being replaced with much higher interest going forward. These are all signs of moving in the right direction given the new realities we face. Less-richly-valued stocks and higher-yielding bonds are both good things. However, I recognize that the process to get there is painful.
I am optimistic these moves set us up for a more positive investing experience in the not-so-distant future. If, somehow, you came into a pile of cash recently, the investable world actually looks more attractive today than it did even a few months ago. It will take time to forget about our collective ‘bad fall’ and the boo-boo that followed, but eventually, we will all heal. A residual scar or imperfection may linger, but if the markets have taught us anything over their history, it’s that we will be healthy again, eventually.
If we need to talk through your concerns, we’re always here to lend a reassuring ear. Stick with things and while we wait out the healing process, maybe go for a ride to enjoy the summer weather. Just remember to bring your helmet!