Process & Perspective – 2 Keys to Surviving Bear Markets

This week, Dave walks us through how changing our perspective and focusing on the things we can control as investors is imperative to living a healthy financial life.

Process & Perspective - 2 Keys to Surviving Bear Markets

This week, Dave walks us through how changing our perspective and focusing on the things we can control as investors is imperative to living a healthy financial life.

Five Things You Should Know

Equity Markets – were higher this week with U.S. stocks (S&P 500) up 5.88% while international stocks (EAFE) rose 7.75%.
Fixed Income Markets – were higher with investment grade bonds (AGG) up 2.30% while high yield bonds (JNK) rose 2.04%.
Election Unknowns – As of Friday, the full results of this week’s mid-term elections are still unclear. As it currently stands the GOP are expected to regain majority control of the House, while Senate control remains up in the air awaiting results that could possibly not be decided until after a runoff vote can occur next month.
Inflation Optimism – In this busy week, markets also welcomed the news that the all-important headline inflation number fell from its peak to come in below 8%, resulting in a +5% gain on the S&P 500 on Thursday. Bonds also felt some relief from the news with the Barclay’s Agg bond index up over 2% on Thursday as well.
Key Insight – [VIDEO] & [ARTICLE] This week, Dave walks us through how changing our perspective and focusing on the things we can control as investors is imperative to living a healthy financial life.

We would like to take a moment on this day to thank all of our Veterans who have served, or are currently serving our country. Your sacrifice and bravery will never go unnoticed and we continue to pray for your safety.

Insights for Investors

Real financial advisors operate at the intersection of what matters and what’s important” – Carl Richards

I’ve spoken in the past about the limited resources we as people really have – time, energy, and money. My hypothesis is; if our energy flows to where our focus is, then there is a direct correlation to our energy output. We can control limited things in our financial life and focus is one of them. It is extremely important where we put our attention. Ideally, it should be at the intersection of what truly matters to us and what we can control (emphasized below).

We here at TEN Capital strive to exist at this intersection; from the advice we give to our clients, to empowering themto choose their most successful modus operandi. I’d argue that this is what sets us apart. It’s our ability to define both the art and the science behind our process. This is where we put most of our time and energy and we strive to make it bothquantifiable in measure AND understood from a guttural perspective.

So, let’s look under the hood at both the art and science referred to above.

Things that Matter – This is the science behind our process of getting to know new clients. We sit down without asking about what you owe or what you own. We literally play a card game in a logical way that opens you up to defining and exploring your hopes and dreams. We want to understand what makes you tick as an individual and as a couple. It establishes your “why” behind the reasons you invest and allows us to create the appropriate benchmark for your investment plan, or the outcomes you want to realize in life. If money is just a tool for you to experience the things you believe in, your non-negotiables for living your best life, shouldn’t your investment plan simply be a function of helping you realize them?

Things You Can Control – The needle is really moved not just by defining things you can control (your savings, debt control, cash flow, estate planning, gifting strategies, tax strategies, etc.), but how you THINK about things you CAN’T control. Your PERSPECTIVE. So many times we expend so much energy on the uncontrollable that we have little to no energy left to focus on the things we can control. Perspective, in this case is the cure. We can control our perspective and the story we tell ourselves when we start mentally spinning on these things that really do exist but are out of our control.

Let’s play out one real life scenario I continually come across with clients when we sit down – Inflation.

Perspective One on Inflation – Inflation is not only out of control, but prices are also never going down. Our cost of living is up, yet our investments are down year to date. If our investment portfolio is supposed to be an inflation hedge, then it isn’t working. Pile on mid-term elections, the Fed raising rates with no end in sight, out of control government spending, etc. This is a perspective many folks I’ve been chatting with here recently are choosing to take. Well, and course, the media loves it too. It’s depressing, it’s stressful, and it’s not fun.

Perspective Two on Inflation (and the one I choose to take) – Let us take a little advice from a thought leader in our industry, Nick Murray, and run through a quick exercise looking rationally at real data to play this one out.

In 1969, (see below Y Charts statistical data) the S&P 500’s dividend per share was roughly $3.25. This month in 2022, its dividend is closer to $65 per share. An increase of 20x.
In 1969, Core Inflation (based upon the CPI readings) was sitting at 38. Today it is closer to 300 and moving upward. An increase of roughly 8x.

Common sense would tell us that simply the increasing dividends from 500 of some of the most important companies to us as investors have outpaced that of inflation 12x since 1969.

As the old saying goes, history does not repeat itself but it rhymes, and the correct perspective on your investments being one of the best and consistent hedges on inflation is backed by rational thought and actual data. This leads me to feel one thing on my personal financial future: OPTIMISM.

It is amazing how a little shift in perspective can have massive impacts on even the things we cannot control in our financial life. If you ever need a little perspective shift, we’re here, just pick up the phone.

To your health and living richly,

Dave and the team at TEN

Data, Just the Data

Data points this week included:

U.S. Jobless Claims – rose by 7K to a claimant count of 225K for the week ending November 5^th. This is the biggest expansion in over four weeks and was above forecasts of 220K. The four-week moving average fell minimally by 250 people to a count of 218.7K.
U.S. CPI – slowed down for the fourth consecutive month to a rate of 7.7% for the month of October. This is the lowest rate since January when the CPI was at 7.5% and below expectations of 8%. Energy rose 17.6%, but lower than September’s rise of 19.8%. Food also decreased to 10.9% and used cars and trucks fell substantially from a 7.2% rise to a 2% rise. Core inflation, excluding food and energy, came in at 6.3%, down from 6.6% the month previous, and came mostly from shelter.
U.K. Industrial Production – Bumped up 0.2% MoM in September, after a (1.4%) decline from the month previous. This beat expectations of a (0.2%) drop and marks the first expansion of industrial output since May. Manufacturing output did although stall with metals production and refined petroleum products falling (3.4%) and (1.2%), respectively.
U.K. Monthly GDP – contracted by (0.6%) MoM in September, showing the second consecutive month of a decline. The service sector fell (0.8%), with (2%) dropping in wholesale and retail trade. Consumer facing services also contracted (1.7%), but industrial production rose slightly higher by 0.2%. Sentiment in the kingdom is low as recession looms.
Eurozone Retail Sales – bumped up by 0.4% MoM in September, which was in line with forecasts and was a welcomed reading after three consecutive months of stagnant sales or decline. Rising borrowing costs, high inflation, and the energy crisis are still putting downward pressure on consumers, though the sales are slightly up. Online trade bumped up 2.6%, and sales of non-food products rose 1%. Sales have dropped (0.6%) YoY, which is slightly better than expectations of a (1.3%) decline.