I look at the markets every single day; that’s my job. Many of my clients don’t, which has been especially good this year. However, I know that many peeked at their September 30th statements a few weeks ago and felt gloomy due to the declines that we all saw. Because of that, I wanted to celebrate something, anything, with you: October was a very good month for stocks, which were up 8.1%, making it the best month for the stock market since 1976!
Where does that leave us? For the calendar year (which coincidentally started off at an all-time high in the stock market) through October 31st, the stock market is still down 15.7% (but was down almost 25% just a few weeks ago); meanwhile, bonds overall are down 17.7% due to actions by the Federal Reserve to combat inflation.
Obviously it has been a rough year for investors, particularly for those who are have balanced or conservative objectives since they hold bonds which were supposed to help shield those portfolios from volatility, and have been unable to do so due to these aggressive interest rate hikes. However, take solace in the fact that bonds, very differently than stocks, must ultimately come back to their maturity values. Then, at maturity, since rates are rising, those funds can buy new bonds at a higher coupon, giving the bond portion of the portfolio a great opportunity to head upwards going forward due to the higher reinvestment yields.
Note that none of this will happen quick, but that’s the way it is with long-term investing: it’s a marathon, not a sprint!