About a year ago I began training for the “Gasparilla Distance Classic,” a collection of footraces that spans a weekend in Tampa, FL every year. I attempted to complete a challenge consisting of four races: a 5k, an 8k, a 15k, and a Half Marathon all within 24 hours. If you’ve ever spoken to anyone who has run a long-distance race, swam an endurance swim, or competed in an endurance event of any kind, they will tell you about the euphoric moment of finishing or even winning the event, but often the pain of training and enduring is left out. Similarly, when investing we talk about our wins or how we completed our financial goals, but we fail to share the pain or anxiety that comes with that at times. Unfortunately for many of us in our marathon of investing, we are in the midst of training season and now is a difficult time. 

After a potentially promising start for the markets in the third quarter, the markets gave back most of the gains and by the end of September the market was at new lows. The S&P 500 was down about 24%, with the Dow Jones down less and the NASDAQ, again, down more. Bonds also continued their struggle in the third quarter with yields on the 10-Yr Treasury rising close to 4.0%. Remember, as bond yields rise, bond prices fall. The markets continued their downward streak as the economy faced the same issues as before with little true improvement: high inflation and a Federal Reserve resolute on trying to slow it down. 

Last quarter we asked the question, “How did we get into this situation?” The next natural question to ask is “What comes next? Up or down?” The reality with that question is both up and down. The economy is weaker than it was to start the year but still very resilient. Consumers are adapting and while some consumers may be changing what they purchase, the important thing is that consumers haven’t pulled back on their purchases overall. In addition, businesses have slowed the pace of hiring, but few companies are experiencing mass layoffs and the unemployment remains near all-time lows solidly below 4.0%.  Furthermore, leading indicators indicate that inflation is turning downward but is likely to remain stubbornly high. Until inflation tapers off more substantially and the Federal Reserve stops increasing interest rates, we are likely to see continued volatility in the markets. 

In this way, the current state of the economy and markets is very similar to the middle of training for a marathon. It’s uncomfortable, it’s tiring, and it seems like the pain will never end. Rather than focusing on where the bottom of the market is, we recommend reviewing your plan. Preparing for a marathon means identifying your pace you’re going to run at, what you’re going to eat or drink along the way, and even what shoes you’re going to wear. Investing is the same way. Have you identified with your advisor the right asset allocation (your marathon pace), what you’re going to eat along the way (rebalancing and adding to the portfolio), and the right mix of accounts, annuities, and insurance you’re going to need (the right shoes and socks)? These are the things that in the moment of endurance help you reach the euphoric end goals, whether you are running or investing.