The Prudent Retiree - February 4, 2021

Colin Powell has been one of our country’s leading military leaders and statesmen for the past fifty years. He was a Four-Star General who was the first African American to serve as Chairman of the Joint Chiefs of Staff, National Security Advisor and Secretary of State. Not many Americans have a resume of such accomplishment.

We hear a lot these days. Television, radio, the internet, a constant bombardment of sensible and non-sensical. The challenge is to discern what matters and how it impacts the market and our investments. Powell’s advice is spot on—when there is turmoil, don’t believe the first thing you hear. Prudent Retiree believes investors should listen to the market and not the often questionable advice and raging of various talking heads. Our primary responsibility is always working to avoid large losses. That is not on the agenda of most media pundits telling us what to think.

As you know, I like to rely on historical context to help make decisions. I voted in my first Presidential election in 1972. The voting age had just been lowered from twenty-one to eighteen. Richard Nixon won a landslide that year. Since 1972, we have voted for President thirteen times. We have elected seven Republicans and six Democrats. Pretty even, which seems to indicate that Americans as a whole like to end up somewhere in the middle.

Fear and panic are investors’ worst enemies. They can cause us to take a wrong turn. Fear and panic often happen because we listen to the first thing we hear and that gets amplified over and over. Remember, what the market thinks is all that matters.

I was thinking about “disasters” that have occurred since I first voted. Some were worse than others, but all caused fear and panic. Here goes — Watergate and Nixon’s resignation, oil embargoes and gasoline lines, the Iran hostage crisis, 20% interest rates and 13% inflation, the Black Monday market crash in 1987, the Savings and Loan scandals, Y2K, the dot com crash, 9/11, the 2008 housing crash, the 2011 Greek contagion and US government debt default, Covid-19 and the economic shut down, and the 2020 election crisis. Most of you have also lived through these events.

In November 1972, the Dow Jones crossed over 1,000 for the first time. Right now, the Dow trades over 30,000. Every one of the above “disasters” could have caused investors to make a harmful mistake if they believed the first thing they heard. Far better to have followed how the market responded to these events. We urge you to maintain your current allocations. Market metrics are positive and the Fed is supportive. We will suggest change when the market indicates a different course.

Prudent Retiree salutes Colin Powell and Black History Month.

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Securities and advisory services offered through LPL Financial, a registered investment advisor. Member FINRA/SIPC. The opinions voiced in this material are for general information only and are not intended to provide specific advice or recommendations for any individual. All performance referenced is historical and is no guarantee of future results.
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