Reassessing Your Goals In A Bear Market
A Bear Market begins when the S&P 500 closes at least 20% down from its previous high. On Monday, June 13, 2022, the S&P 500 closed at 3,750.50, 21.8% lower than the last high on January 3, 2022 at 4,796.56, signaling a new Bear. You may be wondering, What Do We Do Now? From a professional money management perspective, not much changed overnight. The investment philosophy that guides our decisions remains the same. But there are some things individuals can do if concerned about inflation or a possible recession.
Typically a new year is a time to set goals and plan for all the wonderful things you will accomplish throughout the year, but by mid-year, most people (54%) have long since abandoned those resolutions. One benefit of an economic downturn is that it can stimulate our motivation to reassess our priorities and get serious about making changes. So, welcome this new bear market with a financial goal check-in.
What Do You Want?
With the price of a gallon of gas now averaging $5.014 according to AAA and much higher in some parts of the country, a friend's Facebook post announcing the delivery of their new Rivian Truck (they ordered two years ago) might come with a twinge of envy. Or, if your neighbor recently retired and downsized into a condo, you may wonder if maintaining a big house is still your goal. Yet, what is suitable for your friend or neighbor might not be right for you. So how do you know the difference? Fortunately, figuring out what you want may be easier than you think.
According to researchers at Morningstar, the ability to successfully achieve your goals hinges upon two simple steps: First, identifying the most important goals, and second, prioritizing those goals.
Try this experiment. Write down your top three financial goals and rank them in importance. Then consult the Master List of Goals. Did your objectives change after looking at the Master List? If you are like most people (73%), you likely changed one or more of your top three goals after consulting the list.
Research shows that we likely miss essential priorities if asked to create a list of goals on our own. However, consulting a list allows us to overcome cognitive blind spots to consider those issues that are not necessarily top of mind but are nonetheless very important.
So while we do not recommend welcoming this Bear Market with open arms, we will use it as an opportunity to identify and prioritize objectives before taking action like putting a deposit down on an electric vehicle (although you may still decide to do that).
If your financial priorities change after going through this exercise, we encourage you to share those with your financial advisor. However, if you don't have an advisor and need help getting started building your financial plan and investment strategy, schedule a FREE consultation with one of our professional investment advisors. For two decades, the Hurlow Wealth Management Group has helped clients achieve their financial goals by creating clarity around priorities, feeling confident to make decisions, and ultimately achieving comfort through appropriate risk management associated with investing.