The Prudent Retiree - November 23rd, 2021

Widespread Panic is one of my favorite bands. I’ve listened to them for about thirty years. The last couple of times I saw them live, I was probably the oldest person at the show. This weekend I listened to a Panic song I’ve heard many times— “Makes Sense to Me.”

I thought about the dichotomy of the song title and the band name. How can something make sense and there still be a widespread panic? Consider this in the context of the stock market. In the past two years, we have experienced the widespread panic caused by multiple shocks to our society and economy. Think about just a few—the Covid virus, the economic shut down, political turmoil and social unrest. Do record setting stock prices make sense? Many of you have been worried that the market will crash. Stocks have continued to rise.

Here’s what makes sense to me. An accommodative Federal Reserve has pegged interest rates at all time lows, consumers and businesses are awash with money to spend and the economy continues to reopen. That bodes well for corporate profits and the market. Widespread Panic also sings a song called “All Time Low.” That is fine for interest rates, but not the stock market.

Yes, there are worrisome trends. Covid is still going strong, inflation is rearing it’s ugly head, politics remain nasty, taxes may go up, debt is increasing and on and on. These are very real risks that could cause widespread panic. What do we do? Follow the only course that makes sense to me and prudent retirees—listen to the market. Act as the market tells us to act. Metrics and our risk management model remain positive. Maintain your current equity allocations.

Enjoy a blessed Thanksgiving with family and loved ones. Try not to have widespread panic at the dinner table. Makes sense to me.

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