CT wealth managers urge clients to remain calm amid ‘terrible market’

Most Americans with investment plans for retirement or other investment portfolios will not look forward to the first half of 2022.

Over the past six months, financial markets have been rocked by economic turmoil and uncertainty caused in large part by soaring inflation and rising interest rates. Underlining the upheaval, the flagship S&P 500 index ended the first half of the year with a loss of more than 20% after starting the year at a record high – marking its worst start to the year since 1970.

Amid the turmoil, a number of Connecticut wealth managers said they were advising their clients not to panic and to stay focused on their long-term goals.

“It’s obviously a terrible market environment with a lot of volatility,” Brian Moss, founder and CEO of Soaring Capital Management, a Darien-based private wealth management firm, said in an interview. “But my clients took it head on.”

Widespread losses

Market volatility reflects investor anxiety and uncertainty amid soaring interest rates as the Federal Reserve and other central banks grapple with the highest inflation in more than 40 year.

The Fed has raised interest rates three times this year, with last month’s three-quarters of a percentage point increase the biggest hike since 1994. Higher rates can reduce inflation, but they also slow the economy and increase the risk of recession.

On June 13, the S&P 500 fell into a bear market. Last week, it was 21% below its all-time high on January 3 and back to where it was at the start of March 2021.

“Clients are obviously concerned about market behavior,” Donovan Wildgoose, Bank of America Private Bank’s managing director for the southern Connecticut region, said in an interview. “What they’re talking to us about and sharing their concerns with is really about their long-term goals and they want reassurance as to whether those goals are still intact or whether there’s something we need to do to make sure that they stay on track. It’s really an interesting time.

Bonds, an ostensibly reliable part of investment portfolios, also faltered, reflecting investors’ worries about inflation eroding the purchasing power of fixed bond payments. Investment-grade bonds are down around 11% in the first six months of 2022. Such a drop is even more visible due to its scarcity. The Bloomberg US Aggregate Index, a widely used benchmark, has posted only four years of losses since 1976.

Cryptocurrencies have also failed to provide a safe haven from market turmoil. Bitcoin plunged from nearly $69,000 last November to under $20,000 last month, in part due to the same factors that have hammered stocks: inflation and rising interest rates.

“Almost all of my clients understand that markets go up and markets go down and that we can’t control a lot of those factors,” Moss said. “I’ve also had a lot of potential clients calling me very worried, saying ‘What am I doing?’ or ‘I lost so much money, and will I ever get it back? Will I ever be able to retire?

If a recession hits, Moss doesn’t expect it to be severe. He also thinks the current disruption could lessen the impact of such a slowdown.

“You’ve seen the markets take their losses before in anticipation of a recession,” Moss said.

Focus on the long term

Many experts say investors should prepare for more headwinds, but not act recklessly.

“It sounds like a ‘stagflation’ type environment to me,” said Ray Dalio, founder of Westport-based Bridgewater Associates, the world’s largest hedge fund, in a recent interview with CNN’s Richard Quest. “People need to know what that means. For example, interest rates and the debt securities they hold will not have an adequate real return. In other words, not enough revenue to offset inflation.

Dalio added that “if people start thinking in terms of purchasing power and realize that cash instruments and debt securities are going to be a challenge and try to diversify their portfolios, these would be the main securities that I would transmit”.

Wealth managers are also urging clients to remain confident in long-term strategies.

“If we look at market behavior in the past when we’ve had these types of corrections and pullbacks, history has shown us time and time again that an investor who sticks to his plan will ultimately benefit from his stake when the market recovers,” says the wild goose. “Emotion is the enemy of long-term returns.”

Moss also encourages its clients to take a long-term view of the markets. He said the strength of Soaring Capital’s client investment portfolios was proven by their average decline of just 10% in the first half of 2022, compared to the 21% decline in the S&P 500.

“You need to be balanced, diversified, and allocate with a lens toward the potential downside, not just upside,” Moss said. “To quote Wayne Gretzky’s famous quote: ‘Skate where the puck is going, not where it is.'”

This article contains reports from The Associated Press.

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