With the news reaching us everyday of new developments in the Israeli Hamas
conflict, you may have concerns that go well beyond how this affects your
investments, a completely understandable mindset.
However, for those of you concerned about your current portfolio situation in
these times, I wanted to take a moment and share with you our positions.
Hamas initiated an attack on Israeli civilians and Israel is now retaliating,
with the goal of eliminating Hamas, an acknowledged terrorist
organization, as the official governing body of the Palestinians in Gaza.
This is a huge challenge as Hamas was elected by the Palestinian people.
This conflict goes back thousands of years, and in the recent era, back to
the breakup of the Ottoman Empire, and disagreement over who should
have rightful ownership of the lands in question.
How do markets typically react in these situations?
Any of you who have followed our academic investing science
conversation know that no one yet has shown they can reliably predict the
future, as it applies to history, the economy, or the markets. If in 1939 I
had told you Hitler was going to invade Poland, what would you have
thought the future held for the duration of that conflict? Would you have
thought that it was going to last 6 years and millions were going to die and
the conflict would ultimately affect most of the inhabited world? And if I told
you all that was going to happen, would you have thought that was a good
time to invest? Did you know that the US stock market roughly doubled
(including reinvested dividends) during that time, quite a remarkable
In hindsight we can Monday morning quarterback and figure out why, but I
assure you none or very few asset managers or economists today would
be able to predict that outcome. And any that did predict it would by and
large be attributable to luck.
What macroeconomic factors are influencing the market?
No secret here - interest rates are having an impact. Using the traditional
"4% rule" for a portfolio, if you had $2,000,000 of retirement assets right
now, you could take $80,000/year income and increase it every year for
inflation and not run out of money before age 100, and avoid the
vicissitudes of the equity market.
We probably wouldn't do that, but one can see how this clearly shifts the
need to own equities to have a chance of achieving one's goals. As far as
the conflict in the Mideast, we should all be concerned about all of the
ongoing conflicts (Ukraine, Gaza) and those potentially yet to come
(broader Mideast conflict and China, Taiwan, the Philippines and beyond).
But going back to the previous questions, we don't believe (and the
science doesn't indicate) that there are reliable ways to make use of that
knowledge and those concerns to do better than what we already know
works, which is by and large to ignore the news. The data shows when we
worry and take action based on that worry, we generally make bad
decisions. Remember the old joke - economists have predicted 10 out of
the last 5 recessions.
Having said that we can’t predict the future of the markets based on global
events, there ARE some remarkable opportunities now based on the
interest rate environment. Think of those now holding 3% 30-year fixed-
rate mortgages. We told many people to cherish those BEFORE interest
rates rose, and knew they would be gold if and when interest rates went
up. Similarly there are products available now that allow one to lock in
guarantees based on these higher rates. Although we don’t recommend,
in general, messing with your portfolio, you may want to shift some money
out of the portfolio to take advantage of these opportunities. Talk to us to
see if you can benefit.
How are we adjusting our portfolios?
We are not! However, we may want to adjust your portfolio based upon
your current situation, how you feel the current world situation may affect
your situation, your mindset, or the opportunities mentioned above. Let's
talk - we want to hear how you're doing.
What does this situation mean for me?
Let's talk and see. The main thing we want to encourage you to do is
evaluate your own situation and we can make adjustments accordingly.
But if nothing has materially changed for you since we last spoke, then I
encourage you not to stress about your portfolio, and to focus on those
things you've already told us are most meaningful for you - take care of
your business, take care of yourself, take care of your family.
You can sleep well at night knowing you're doing everything in your control
that you can possibly be doing. And that likely means not messing with
your portfolio - you're likely to do more damage than good. All investors
(and advisors) should adhere to the ethos of the Hippocratic Oath - first do
I welcome you to reach out and let’s have a conversation.
The opinions expressed here are those of the author and not necessarily those of Guardian or its subsidiaries.
Hypothetical examples are not intended to suggest a particular course of action or represent the performance of
any particular financial product or security.
Guardian, its subsidiaries, agents and employees do not provide tax, legal, or accounting advice. Consult your tax,
legal, or accounting professional regarding your individual situation.
The information provided is based on our general understanding of the subject matter discussed at the time of
publication and is for informational purposes only.
Note: This article is for informational purposes only and should not be considered as financial or legal advice. It is
always recommended to consult with qualified professionals for personalized guidance.
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