The Long View
by - Thomas Twombly, artist - Daisy Lopez
It is easy to buy investments. What’s hard is owning the right portfolio over the long term.
For an illustration, as I write this on February 28, 2023, I’ve just looked back at a missive I wrote on this day exactly three years ago, in the very beginning stages of the COVID crisis that continues to send aftershocks of disruption and anxiety through our world. (I’m certain the social, political, and economic changes it helped to unleash, and that we’re all still trying to get our arms around, will continue to be studied and written about hundreds of years from now. Even then, the full impact of this period will be difficult to encapsulate.)
Here is part of what I penned on February 28, 2020:
“As I write this on Friday afternoon February 28th, the S&P 500 has just closed at 2954. In just nine short days, and only seven trading days, it has fallen 439 points and -12.9% from the all-time high of 3393 it set on February 19th. Other major equity indices across the globe have declined by similar margins in this global panic, and the resulting so-called “flight to safety” of billions of dollars reflexively bailing out of stocks has driven the yield on the 10-year U.S. Treasury Bond to the never-before seen level of 1.13%. The sense of fear is palpable, and the headlines, not at all surprisingly, are dire.”
It's common to hear talk about how easy it is for folks to get swept up in euphoric times, and to buy highly speculative investments at peaks (like the recent crypto currency madness.) But pause for a moment and consider just how easy it was, in an environment of fear, for huge numbers of people to reflexively buy 10-year U.S. Treasury bonds at interest rate levels I doubt we will ever see again in our lifetimes, thereby locking themselves into a guaranteed nominal yield (not including inflation or taxes) of 1.13% for the ensuing decade.
Now consider that as I write this missive three years later, 10-year Treasury Bonds, at a current yield of 3.98%, are now offering more than 3.5 times the yield they were then. Even so, current inflation is running at 6.4% year-over year, and it’s entirely unclear at this point whether or not interest rates have been raised enough yet to quell this surge. (The S&P 500, meanwhile, having gone through all manner of wild gyrations in the last three years - as it has always been wont to do in the short run - is currently sitting at a level that’s just below 4000. This is slightly less than 18% higher - not including dividends - than where it stood on that February 19, 2020, all-time high before the COVID crisis erupted.)
The deep regret of having to own knee-jerk decisions is all too common an experience. But without a clearly defined long-term investment plan in place, without preparation, and without the courage of their convictions to stand fire in the midst of whatever the next crisis du jour may be, investors of all stripes will undoubtedly continue to suffer similar experiences in the future.
I have long imagined a figurative double helix that runs through all of our lives – rising, falling, twisting, and turning as it presents an ever-changing, constantly mutating array of both pitfalls and opportunities along our multi-decade quest for financial and investment success.
On one strand of this double helix lie the mystifying highs and the terrifying lows of the worldwide political economy and financial markets. Its vagaries and vicissitudes constantly present both alluring attractions and brutal challenges for modern day humankind to navigate. It affects (and reflects) the emotions of almost everyone around us, so the current mood of the crowd is very hard to resist. But those moods are also notoriously fickle, and subject to sudden and significant change. It requires a patient, disciplined, long-range view, an ability to embrace all kinds of ambiguity, and an even-handed temperament to steer that course.
On the other strand of this double helix lie the unique circumstances and individual twists and turns of our own deeply personal lives. It is comprised of the evolving private journeys we undertake, including the hopes, dreams, and successes, as well as the disappointments, nightmares, and crises that visit virtually every individual and every family over their lifetimes. Some of these twists and turns can be anticipated and planned for. Many others come as complete surprises, and just have to be confronted and endured – often accompanied by a sense of isolation, vulnerability, and insecurity.
Even the most thoroughly prepared and resilient among us find ourselves needing trustworthy allies, a sounding board, resources, and counsel when those kinds of situations arise. Because, by definition, it means something, and perhaps many things at once, have suddenly not gone according to plan. I’m pretty sure you’ve felt that way. I have certainly felt that way. I suspect everyone has felt that way – and probably on more than one occasion. That’s the nature of life.
A good advisor can’t foretell the future any better than you can, and they’ll never claim to. They’re not perfect, and they’ll never make themselves out to be. But what they can do, with your willing participation, is to help you clearly define what is most important to you, and why it’s so important. They’ll help you determine when it needs to be accomplished, and how much it’s likely to cost. And then they’ll help you plan out the various things you must do, as well as all the things must not do, in order to give yourself a fighting chance of achieving those most treasured objectives – including putting together a prudently constructed investment portfolio that has a broad historical likelihood of getting you where you want to go, and then doing everything possible to help you stick to your guns.
If you, or someone you know, is looking for that, please give us a call. We’d love to help.
Thank you for your confidence and trust,
Thomas Twombly,
President