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It’s no doubt been a painful year thus far for investors. After many years of spectacular gains and low interest rates, financial markets are now struggling to digest a deluge of new information—high inflation, ongoing supply chain disruptions, rising interest rates, Covid-induced lockdowns in China, and the war in Ukraine—to name only a few. Subsequently, markets have moved lower as they work to assess what it all means for the economy and the prices of everything from stocks and bonds to real estate and cryptocurrencies. This has certainly been a painful process. The big winners over the past few years, things like Bitcoin and the FAANG stocks (Facebook, Apple, Amazon, Netflix, and Google), are on average down nearly 40% for the year. More broadly, U.S. stocks, as measured by the Russell 3000 index, are down nearly 20% for the year, while bonds—typically a powerful diversifier—have fared little better, down about 12% YTD as measured by the Barclays Global Aggregate Bond Index.
It’s worth reiterating that, during such times, it’s important for investors to step back and put some distance between stimulus and response. While negative year-to-date returns are painful—especially after many years of eye-popping gains—how we choose to respond to negative returns today will have a significant impact on the returns we could earn tomorrow. Things like reducing stock exposure, moving to cash, or adding exotic “alternative” investments to our portfolios might feel like the right thing to do right now, these are very serious decisions. None should be taken lightly. Reacting can seriously hurt performance, especially when making decisions in the heat of the moment or based on things far beyond our control. So, what are investors to do?
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Mercer Advisors Inc. is the parent company of Mercer Global Advisors Inc. and is not involved with investment services. Mercer Global Advisors Inc. (“Mercer Advisors”) is registered as an investment advisor with the SEC. The firm only transacts business in states where it is properly registered or is excluded or exempted from registration requirements.
All expressions of opinion reflect the judgment of the author as of the date of publication and are subject to change. Some of the research and ratings shown in this presentation come from third parties that are not affiliated with Mercer Advisors. The information is believed to be accurate but is not guaranteed or warranted by Mercer Advisors. Content, research, tools and stock or option symbols are for educational and illustrative purposes only and do not imply a recommendation or solicitation to buy or sell a particular security or to engage in any particular investment strategy. For financial planning advice specific to your circumstances, talk to a qualified professional at Mercer Advisors.
Past performance may not be indicative of future results. Therefore, no current or prospective client should assume that the future performance of any specific investment, investment strategy or product made reference to directly or indirectly, will be profitable or equal to past performance levels. All investment strategies have the potential for profit or loss. Changes in investment strategies, contributions or withdrawals may materially alter the performance and results of your portfolio. Different types of investments involve varying degrees of risk, and there can be no assurance that any specific investment will either be suitable or profitable for a client’s investment portfolio. Diversification does not ensure a profit or guarantee against loss. Historical performance results for investment indexes and/or categories, generally do not reflect the deduction of transaction and/or custodial charges or the deduction of an investment-management fee, the incurrence of which would have the effect of decreasing historical performance results. Economic factors, market conditions, and investment strategies will affect the performance of any portfolio and there are no assurances that it will match or outperform any particular benchmark.