There are many reasons to feel stressed and anxious these days, especially when it comes to the economy and investments. Between the growing unrest in Europe, endless COVID-19 waves and rising inflation, it can feel impossible to catch a break. The incessant negative news from the media reinforces all of this.

As with anything in life, there is always going to be a mixture of good and bad. The important thing is to avoid focusing solely on the bad. Any decision made out of fear may cause problems further down the line. Moreover, if we have incomplete or simply false information, our decisions are likely to be wrong.

Let’s look at a few facts.

1. Today’s Volatility Is Not New

In March 2022, Harford Funds published a chart that displays some of the market dips of 30 percent or more in the S&P 500 Index drops over the past 61 years.

2. Panic could cost you in at least three ways

Market drops are normal. From January 1, 1980, to December 2021, the S&P 500 Index saw average annual drops of 14 percent, yet the average return over that period was 9.4 percent per year. With that in mind, let’s look at three ways that panic could cost you.

A. Focusing on the negative, which leads to fear

According to Newsweek, many cable news networks saw a dramatic increase in ratings during their 24/7 Coronavirus coverage. As shown in the chart below, from March 16–20, Fox News saw its ratings climb 89 percent over the same time last year, to 881,000 primetime viewers per day ages 25–54. CNN was up 193 percent to 790,000 and MSNBC climbed 56 percent to 570,000.

Making decisions based on fear creates a self-fulfilling market prophecy — more people are watching the news, which means more people are seeing examples of stories that can cause market instability, which gives them anxiety and could lead to fear-based investment decisions. This kind of mindset is contagious.

As Hartford Funds so accurately puts it, “When we’re anxious, we’re more likely to allocate our attention to negative information. Given the choice between information that may offer an optimistic perspective or data that paints a bleak future, an anxiety-influenced investor may naturally focus on threatening information.” When investors focus on that information, they tend to “play it safe” with their investments, potentially losing out.

B. Playing it safe

When a person senses instability, the natural instinct is to do everything possible to cultivate protection. This may mean moving to cash or fixed income. The problem with either action is that often, the best days in the market are within a week or two of the worst days, and you miss them. Missing just a few days can result in permanent loss.

In the two decades from 2001 to 2021, we experienced three bull markets and three bear markets, along with the terrorist attacks in 2001, the financial crisis in 2008 and the COVID-19 pandemic of 2020–22. Yet despite these unprecedented events, the S&P 500 still managed to generate a total annual return of 8.06 percent with reinvested dividends. The total return over this period was 409.13 percent. This means that a $10,000 investment made at the beginning of 2001 would have been $50,913.05 by the end of 2021.

Some investors move to bonds in an effort to avoid losses. However, moving to bonds not only may cause you to miss market returns but also to lose value in the bonds themselves. As interest rates rise, bond prices will drop. For the first time in several decades, we are seeing interest rates rise. The chart below shows how being out of the market could impact your portfolio.

C. Losing perspective — our economy is strong

When people feel panic setting in, they tend to change their behaviors to try to alleviate that feeling. As mentioned, this reaction or a focus on inflated safety can contribute to the loss of gains when the market does recover.

It is also common for individuals to see the market dropping and decide to abandon their overall plan to “stop the bleeding” and then wait for things to get better. This is market timing, and it doesn’t work.” As we have said previously, by trying to time the market, you potentially miss out on rallies. There is endless research out there proving that investors who try to time the market by hopping in and out of investments when the going gets tough often fail. It’s impossible to pick the accurate moment to dive in or pull out. We’re here to encourage you to maintain your perspective and to have a plan in place for when you need short-term cash and long-term cash.

Today the markets and economy are relatively strong. We are facing the headwinds of higher interest rates and inflation; however, overall earnings for companies remain strong. Moreover, as we have more uncertainly in Europe, the Middle East and even Canada, more funds will be directed to the United States. It has been said that our government is dysfunctional but stable.

According to the Bureau of Labor Statistics, the U.S. GDP grew 5.7 percent in 2021 after decreasing 3.4 percent in 2020, and GDP reached almost $23 trillion in 2021. This is the highest GDP growth rate in 37 years.

Thanks to stimulus checks, unemployment insurance and the Child Tax Credit, Americans have an average of 50 percent more money in their bank accounts than before the pandemic. Overall, wages are up, increasing by as much as 11 percent in some sectors. Unemployment has fallen to an astonishing 4.6 percent, back down to pre-pandemic levels. In the midst of a global pandemic, 11 million people were lifted out of poverty in 2020.

Corporate earnings numbers for Q1 2022 have been great. Right now, figures reflect S&P 500 earnings per share, tracking to a 31 percent year-over-year increase. (Yahoo! News) Now, of course this is all easier said than done. However, there are some helpful charts and years of data to show why what we are seeing is not new and also why panic may lead to very poor decisions.

3. There is opportunity in the market downturns

What many people don’t realize is that uncertainty can actually create opportunity for those who take advantage of the situation.

In one of our 2021 blog posts, “Volatility Is Our Friend,” we discussed strategies investors can use to benefit from volatility, including tax swaps and rebalancing from equity to fixed income or vice versa. Our team can help you discover and leverage the opportunities that are inherent in market downturns.

As Winston Churchill said, “Never let a good crisis go to waste.”

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Ultimately, it’s impossible to manage your emotions in a vacuum. The media are almost solely focused on the negative. There have always been pandemics, geopolitical events and concerns about the economy, going back 1,000 years. The one thing that has changed is the volume of information we are exposed to.

Our team is here to help you make decisions based on facts and needs — not emotions or panic. With more than 250 years of combined experience, our team is here for you. It’s likely the news will get worse and markets will be volatile. Our Personal Vision Planning^® process takes into account the unforeseen. Feel free to reach out to us any time. Your vision is our priority.

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Randy Carver, CRPC^®, CDFA^®, is the president and founder of Carver Financial Services, Inc., and is also a registered principal with Raymond James Financial Services, Inc. Randy has more than 32 years of experience in the financial services business. Carver Financial Services, Inc,. was established in 1990 and is one of the largest independent financial services offices in the country, managing $2.2 billion in assets for clients globally, as of December 2021. Randy and his team work with individuals who are in financial transition as a result of divorce, retirement or the sale of a business. You may reach Randy at randy.carver@raymondjames.com.

The information contained in this post does not purport to be a complete description of the securities, markets or developments referred to in this material. The information has been obtained from sources considered to be reliable, but we do not guarantee that the foregoing material is accurate or complete. Any information is not a complete summary or statement of all available data necessary for making an investment decision and does not constitute a recommendation. Any opinions are those of Randy Carver and not necessarily those of RJFS or Raymond James. Expressions of opinion are as of this date and are subject to change without notice.

Returns are based on the S&P 500 Total Return Index, an unmanaged, capitalization-weighted index that measures the performance of 500 large capitalization domestic stocks representing all major industries. Indices do not include fees or operating expenses and are not available for actual investment. The hypothetical performance calculations are shown for illustrative purposes only and are not meant to be representative of actual results while investing over the time periods shown. The hypothetical performance calculations are shown gross of fees. If fees were included, returns would be lower. Hypothetical performance returns reflect the reinvestment of all dividends. The hypothetical performance results have certain inherent limitations. Unlike an actual performance record, they do not reflect actual trading, liquidity constraints, fees and other costs.

Also, because the trades have not actually been executed, the results may have under- or overcompensated for the impact of certain market factors such as lack of liquidity. Simulated trading programs in general are also subject to the fact that they are designed with the benefit of hindsight. Returns will fluctuate and an investment upon redemption may be worth more or less than its original value. Past performance is not indicative of future returns. An individual cannot invest directly in an index.

As news outlets release reports about Russia invading Ukraine, inflation rising and global supply-chain issues continuing, the word “unprecedented” is being used — once again. When COVID hit us two years ago, the world began using the word “unprecedented” to describe that situation as well. Indeed, it was a situation most of us had never seen before: quarantines, lockdowns, economic shutdown. The word is used to describe just about any new global situation that arises.

These types of crises, and the subsequent stock-market downturns and recoveries, are serious, but they are by no means unprecedented. Markets and investors tend to overreact to negative news or new events. With each crisis that unfolds, while many people panic and sell assets at low prices, a small group of patient, methodical investors view the stock market collapse as an opportunity.

What’s going on today might seem unprecedented. The stock market is sure to react to events like these, and it may come as a shock to some. However, the past two years in the stock market have also been unprecedented. Last year, the S&P 500 hardly saw a 5 percent pullback, and on average, the market pulls back 14 percent every year…how unprecedented! In March 2020, the market fell about 33 percent in 30 days. It was the fastest drop in market history…unprecedented. However, the market recovered all of its losses in only a handful of months…unprecedented once again!

The Stock Market Will Always Fluctuate

History shows us that markets dip after geopolitical events and often recover very quickly. Ned Davis Research studied the 28 worst political or economic crises over the six decades prior to the 9/11 attacks in 2001. In 19 cases, the Dow Jones Industrial Average was higher six months after the crisis began. The average six-month gain following all 28 crises was 2.3 percent.

On Sept. 10, 2001, the day before the 9/11 attacks, the Dow Jones Industrial Average (DJIA) closed at 9,605.51. The stock market closed for a few days and re-opened 17.5 percent lower, several days later. Just six weeks later, by Oct. 26, the Dow was trading higher than where it had closed on Sept. 10.

The markets correct virtually every year; corrections between 5 and 10 percent in the S&P have been regular occurrences. Since 1946, there have been 84 declines of 5 to 10 percent, which works out to more than one a year. The market usually bounces back fast from these modest declines; the average time it takes to recover from those losses is just one month.

J.P. Morgan reports the impact that pulling out of the market has on a portfolio. Looking back over the 20-year period from Jan. 1, 1999, to Dec. 31, 2018, if you missed the top 10 best days in the stock market, your overall return was cut in half. That’s a significant difference for only 10 days over two decades! Putnam Investments found similar results by studying the data from 2003 to 2018. If you were fully invested in the S&P 500, your annualized total return was 7.7 percent during that time. But if you missed the 10 best days in the market, it dropped to just 2.65 percent.

Don’t Panic or Get Out of the Stock Market; Do This Instead

In times of uncertainty and global turmoil, it’s normal to feel like you need to make a change. In almost all circumstances however, the right move is to not make any lasting changes. Here are some tips to help you ride out the storms.

1. Ignore the news headlines. Often, news headlines are not what actually drive the market; instead, corporate profits tend to have more impact, and those still remain strong.
2. Keep situations in perspective. Regarding Ukraine, the country’s entire economy is around $100B per year. Walmart does that amount of business in three months. The actual economic risk related to this situation isn’t as great as it might seem, given the media coverage. More importantly, our thoughts and prayers go out to those living in Ukraine and their families. The human element is of much greater significance.
3. Consider putting cash to work now. Use tax swaps and convert from tax-deferred to tax-exempt investments to benefit from the volatility. Our team can help you with this.
4. Always remember our three-bucket approach to working with our clients. Your financial plan has cash and bonds built into it, for these types of seasons, so that you don’t have to react out of fear. Our entire team is helping clients one by one. Most of our clients have been able to focus on family and friends while ignoring the temporary market pullbacks and having faith in the market’s comeback. Some people are nervous. We understand, and we hold deep empathy for those feelings and are here for you.

If you have questions for our team, do not hesitate to reach out; we are here for you and your family! Because we take a customized approach based on your individual needs and objectives, you are allocated for today’s market environment. We see challenges ahead with higher inflation and increased volatility, but again, these are not new or unprecedented. Our process is proactive, not reactive. The work we do is not based on forecasts or predictions, but on you, your cash needs and your personal vision.

Remember — although things may seem unprecedented, they are not.

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Randy Carver, CRPC^®, CDFA^®, is the president and founder of Carver Financial Services, Inc., and is also a registered principal with Raymond James Financial Services, Inc. Randy has more than 32 years of experience in the financial services business. Carver Financial Services, Inc,. was established in 1990 and is one of the largest independent financial services offices in the country, managing $2.2 billion in assets for clients globally, as of December 2021. Randy and his team work with individuals who are in financial transition as a result of divorce, retirement or the sale of a business. You may reach Randy at randy.carver@raymondjames.com.

The information contained in this post does not purport to be a complete description of the securities, markets or developments referred to in this material. The information has been obtained from sources considered to be reliable, but we do not guarantee that the foregoing material is accurate or complete. Any information is not a complete summary or statement of all available data necessary for making an investment decision and does not constitute a recommendation. Any opinions are those of Randy Carver and not necessarily those of RJFS or Raymond James. Expressions of opinion are as of this date and are subject to change without notice.

The stock indexes mentioned are unmanaged and cannot be invested into directly. Past performance is no guarantee of future results. All investing involves risks, including the principal amount invested. No investment strategy can guarantee your objectives will be met.

Unless certain criteria are met, Roth IRA owners but be 59^1/2 or older and have held the IRA for five years before tax-free withdrawals are permitted. Additionally, each converted amount may be subject to its own five-year holding period. Converting a traditional IRA into a ROTH IRA has tax implications. Investors should consult a tax advisor before deciding to do a conversion.

Technology can be a great help, but it can also pose a risk to our personal information and privacy. As technology evolves and becomes more sophisticated, so do the types of scams we get exposed to. It’s becoming increasingly hard to discern between legitimate communication and nefarious hackers trying to steal personal information and/or money.

Often, though, it’s not technology but social engineering that allows criminals to convince victims to provide their personal information. Social engineering is the use of deception to manipulate individuals into divulging confidential or personal information that may be used for fraudulent purposes.

It could be something as simple as receiving an email saying that some of your credit card information has been compromised and you need to contact the bank to verify your information immediately. Or you get an email or call that your grandkid is in jail and needs bail money as soon as possible. In some cases, the cybercriminals send you an email telling you good news — you just “won” the Publisher’s Clearing House Sweepstakes, and they need your bank account number to wire you the money. Or maybe you get a pop-up message that your computer has been compromised, and you need to reach out to ‘tech support’ immediately. These are all examples of cyber-scams to steal your information and money.

Attend Our Live Event on January 22, 2022

We are here to help you. On Saturday, January 22, 2022, we are hosting a live event to discuss how you can protect yourself. Our featured speaker is Jeff Lanza, a retired FBI Special Agent and cybersecurity expert. There is no charge to attend the event; however, reservations are required.  Please contact our office at (440) 974-0808 or email carverfinancialservices@raymondjames.com to attend.  This will also be recorded and on our website so you can still benefit from the information, even if you cannot attend live.

The Costly Toll of Cyber Scams and Fraud on Americans

Fraud and phishing are common problems facing people across the globe. According to a study conducted by the Centre for Counter Fraud Studies at the University of Portsmouth, people who are in the 65-to-74-year-old age range are 54 times more likely to be victims of fraud or computer scams than they are to be physically robbed.

Newly released data show that the Federal Trade Commission received more than 2.1 million fraud reports in 2020 alone. The same data found that imposter scams — when someone tricks you into sending money to them — were the most common types of fraud reported to the agency, with one in five individuals reportedly falling victim. Online shopping was the second-most common fraud category reported by consumers, elevated by a surge of reports in the early days of the COVID-19 pandemic. Internet services; prizes, sweepstakes, & lotteries; and telephone & mobile services rounded out the top five fraud categories. Consumers reported losing more than $3.3 billion to fraud in 2020, up from $1.8 billion in 2019.

Ways to Protect Yourself

To protect yourself from being taken advantage of, it’s good to learn about the different types of scams out there. Because so many of these scams are now occurring on the internet, it’s important to learn good “cyber-hygiene.” Here are some steps you can take to protect yourself:

• Protect your passwords.
• Avoid clicking links or opening email attachments from people or brands you don’t know.
• Double check to make sure links don’t have odd spellings. For example, you may get an email saying someone you know tagged you in a “Faceboook Photo,” only to see later “Facebook” was spelled with three o’s, and this was actually a phishing scandal. Poor grammar is often a clue that an email is a scam, too.
• Never provide personal information in response to an unsolicited email, robocall or robotext. In fact, it’s a good practice not to provide personal information digitally in general.
• Resist the pressure to act quickly. Scammers create a sense of urgency to produce fear and lure victims into immediate action.
• Trust your gut — if something seems a little off, then it probably is.

Consider signing up for an ID theft-protection service such as Identity Guard^® or Life Lock™. With these protections, you will be notified if someone attempts to take out credit in your name or there are other potential compromises of your information.

Also consider “freezing” your credit with the major reporting agencies. To freeze your credit, which is different from locking your credit, contact each of the three major consumer credit bureaus — Equifax, Experian and TransUnion — and request a credit freeze. You can easily freeze your credit with Equifax on their website; their customer care number is 1-888-298-0045. To freeze your credit at Experian, you can visit their online Freeze Center or call 1-888-EXPERIAN (1-888-397-3742). TransUnion allows you to place a credit freeze online. You can also add a freeze via the automated phone system (or opt to speak to a live agent) by calling 1-888-909-8872.

Carver Financial Services Has Your Back

From technological safeguards to employee policies and operating procedures, we maintain constant vigilance where your privacy is concerned.

Carver Financial Services recognizes the trust you place in us when you disclose personal information. Maintaining that trust by ensuring that your information is secure is a core tenant of our business. We proudly work with Raymond James, who has a dedicated Privacy Office committed to the privacy and protection of the personal information you have entrusted to us.

Both Carver Financial and Raymond James take very proactive measures to protect you. From technological system monitoring 24 hours a day, 365 days a year to utilizing only the best protection technology including encryption, virtual private networks, penetration/vulnerability testing, and the latest firewall and antivirus technology.

The protection of your personal information is a top priority at Carver Financial Services. You can rest assured that your information is safe with our team of talented individuals. Ultimately, though, you must also be vigilant about protecting yourself against the potentially damaging social-engineering scams prevalent in the digital age.

Randy Carver, CRPC^®, CDFA^®, is the president and founder of Carver Financial Services, Inc., and is also a registered principal with Raymond James Financial Services, Inc. Randy has more than 32 years of experience in the financial services business. Carver Financial Services, Inc. was established in 1990 and is one of the largest independent financial services offices in the country, managing $2.3 billion in assets for clients globally, as of December 2021. Randy and his team work with individuals who are in financial transition as a result of divorce, retirement, or the sale of a business. You may reach Randy at randy.carver@raymondjames.com.

The information contained in this post does not purport to be a complete description of the securities, markets or developments referred to in this material. The information has been obtained from sources considered to be reliable, but we do not guarantee that the foregoing material is accurate or complete. Any information is not a complete summary or statement of all available data necessary for making an investment decision and does not constitute a recommendation. Any opinions are those of Randy Carver and not necessarily those of RJFS or Raymond James. Expressions of opinion are as of this date and are subject to change without notice.

We are finding over the last few months that an increased number of emails have been going to Junk folders, as screening algorithms have become more sensitive. We are committed to providing you with timely and appropriate responses to emails and phone calls.

Our office has a policy of responding to all client emails within 24 hours. If someone is out of the office, you will receive an out-of-office reply immediately. If you do not see a reply, it is likely that it went to your spam or junk folder.

If you do not see a reply to your email within 24 hours or an immediate out-of-office message, please check your Spam/Junk folder and/or phone our office.

To prevent emails from our office from inadvertently going to your junk folder, you will want to consider making all emails from “@raymondjames.com” part of your safe sender list. You can see a brief tutorial on preventing email from going to junk by clicking here.

We are committed to providing the highest level of service, including a timely (24 hour) response to emails and calls. Please phone our office with any questions on your email or if we can otherwise be of service. We appreciate your communication and look forward to connecting with you.