The Legacy Perspective - January 2024
By Steve Wachs, CFP®
“A Times story about the country’s financial outlook on Jan. 1, 1929, acknowledged the difficulty of prediction but concluded on an upbeat note: “as to the underlying strength of the American economic system, however, there is only one opinion.” That opinion was bullishness. One Chicago banker predicted that the newly elected president, Herbert Hoover, would “give the country a most constructive and able administration.” The stock market crashed less than 10 months later. ”
This is the time of predictions and forecasts. Smart people offer their assessments of what the year will bring in the economy and financial markets. We take time to read them and maybe glean some insight. We also enjoy reading good works of fiction which these predictions turn out to be. Last year almost all economists forecasted some form of a recession that did not occur. Part of the issue when channeling your inner Nostradamus and actually being accurate about what events will occur, you may take the wrong action which would negatively impact your investment performance. Let’s pretend we wrote the following in this Perspective a year ago.
We would not be surprised that at least 3 major banks will collapse which will be reminiscent of the 2008 financial crisis. In their effort to tame inflation, the Federal Reserve will continue to raise interest rates higher and longer. Finally, besides the continuation of the Russia/Ukraine war, the Middle East will break out into all-out conflict.
Following the negative investment environment of 2022 and our belief that the above events would take place, a prudent action could have been to reduce exposure to risk assets like equities and sit in cash on the sidelines earning 4% interest. As we know now, each of these events did actually occur, and reducing risk would have been the absolute wrong thing to do. The equity markets soared, particularly in the 4th quarter, and bond returns were strong. By staying true to your investment allocation, you were able to benefit from an outstanding year.
So rather than offer predictions for 2024, here are a few things we will focus on which we believe will help you achieve your long-term financial goals. We have created a new Investment Risk Assessment Questionnaire which we will introduce. With the roller coaster ride of the past 2 years, now is a good time to have a discussion about your ability to tolerate the ups and downs in portfolio values that inevitably occur. Being an election year, emotions can be especially strong, and we want to make sure emotions don’t dictate actions. We will also be asking about both planned contributions to your portfolio and any distributions you are considering needing over the next couple of years. Selling investment assets at the wrong time to meet unplanned distributions negatively impacts financial success. Also, we will make you aware if your distribution amounts potentially put your long-term financial independence at risk. Finally, please let us know if you have any questions about assets held outside our purview. This could include the allocation of your 401k account, excess cash being held in bank accounts, or an individual stock you may have purchased some time ago. We want to make sure every investment you own has a purpose.
As we enter a new year, we would be remiss if we did not say thank you for the sacred trust you have placed in us. Our commitment is to be with you on this journey through “your one wild and precious life.”
Disclosures
Legacy Consulting Group is registered as an investment adviser with the SEC and only conducts business in states where it is properly registered or is excluded from registration requirements. Registration is not an endorsement of the firm by securities regulators and does not mean the adviser has achieved a specific level of skill or ability.
Information presented is believed to be current. It should not be viewed as personalized investment advice. All expressions of opinion reflect the judgment of the authors on the date of publication and may change in response to market conditions. You should consult with a professional advisor before implementing any strategies discussed.
All investments and strategies have the potential for profit or loss. Different types of investments involve higher and lower levels of risk. There is no guarantee that a specific investment or strategy will be suitable or profitable for an investor’s portfolio. There are no assurances that an investor’s portfolio will match or exceed any particular benchmark.