And This, Too, Shall Pass
January 29, 2019
Image used with permission: iStock/EttaDallas
And This, Too, Shall Pass
Last year’s performance statement was likely not as good as what you’ve been used to. The news might not get any better in the New Year as businesses steer through an uncertain political and macroeconomic landscape and take a more cautious approach. A case in point is Apple, as CEO
Tim Cook in a letter to investors warned of this reality check early in January, revising the company’s revenue guidance downward for the first fiscal quarter of 2019.
And it is a reality check. Investors have enjoyed a nine-year bull run — the longest in modern history. But just as that run is winding down, it’s also important to remember the market is doing what it always does. It goes up and then it goes down. Repeat. In times of volatility, as we experienced at the end of December and the beginning of 2019, it’s crucial to appreciate the big picture, and stick to, a financial plan.
For context, the last quarter was rough. But, once you look past headline-grabbing noise around politics, trade wars, rising interest rates and tech selloffs, the fundamentals are strong — as Neil Irwin has penned in The New York Times article What should you do about a falling stock market? Nothing. Slower growth is still growth. So, if you’re feeling anxious and want to act, don’t. Set your emotions and any thoughts of exiting and trying to time the markets aside. History shows, it is almost impossible to get back into the markets at just the right time. The most likely outcome for investors so inclined is missing out on the rebound when it happens. And it always does.
Remember the global financial collapse in 2008 and 2009? From peak-to-trough, shares of many blue chip companies were down more than 50%. Every sector of the market plunged. There was nowhere to hide. Now consider this: if you were a Nexus Equity Fund investor in June of 2008, and simply stayed fully invested by buckling up through the financial collapse, you would have now made a 138% return on your investment.(1)
When markets are rough everyone onboard feels the turbulence. However, those with a clear understanding of their investment objectives are able to more easily tune out the commotion and focus on the long-term fundamentals.
At Nexus we work with each client to determine the right mix of fixed income and equities for their portfolio, based on their specific requirements and investment objectives. We define risk as not being able to meet your goals, and regard asset mix as the key driver of long-term investment results. By making sure that your portfolio asset mix is aligned with your objectives, our goal is to create a road map that will help you navigate market fluctuations in order to achieve your desired results over time. This map is dynamic. It is reviewed regularly to reflect what’s happening in your life, as well as capital market expectations, and always with an understanding of your financial capacity and willingness to handle market volatility. This helps ensure decisions are strategic and not a reaction to short-term market dips and turns and that the focus remains on meeting your goals.
We follow the same principles when making investment decisions. To dampen the distracting ups and downs in volatile times, we focus on diversification and high-quality holdings in our security selection process. Our approach is time-tested. Looking in the rear view mirror, the blow of the financial crisis was significantly softened for Nexus clients.
Finally, to put into perspective the tumultuous markets of late, an adage tracing back to an ancient Persian monarch who challenged the wisest in his court to conceive a sentence that would hold true in all situations: And this, too, shall pass.
(1) Nexus return is the compounded total return shown prior to the deduction of management fees, but after deduction of all other expenses. Past performance is not indicative of future results. Return is calculated from June 30, 2008 to January 15, 2019.