“It’s only money.”

My best friend says that all the time. It’s pure irony because to some, money isn’t everything – it’s the only thing.

Note that this quip isn’t to discount those of us who are struggling to get by. Money plays a crucial role in our society, and I’m not making light of that.

But for those of us who are obsessively watching our money in the markets… tracking each dollar as our accounts are falling… and losing sleep at night over it all, we need to occasionally take a step back and refresh our heads.

So on this Memorial Day, I’m going to provide some perspective on all the anxiety about interest rates, inflation, and a potential recession…

The Luxury Trap

When we feel stressed, it can help to look back at the history of civilization.

Eons ago, we worried about necessities like food and shelter and threats like wild animals. Otherwise, we likely led fairly relaxed lives.

When we started farming, we needed to water, weed, care for, and harvest crops. We spent long hard days in the heat hauling water and doing back breaking labor.

Then beasts of burden and farming tools made these tasks more productive. As a result, more food meant easier times and more babies. Our population and general well-being exploded.

And the trend has continued as technology advances. Each successive generation can lead an “easier” life than the prior generation.

Think of what our great-great-grandparents dealt with… and imagine telling them we can potentially 3D print hip replacements to accelerate already fast healing.

Yet these days, we can fall into the luxury trap. We may tell ourselves at age 25 that we will work hard for 10 years and retire to freedom at 35.

Only by then, there are mouths to feed, car and mortgage payments, and colleges to save for. Everyone wants a nicer house, a nicer car, and great vacations too.

And that means we can get anxious about our lives in ways our ancestors never could have dreamed…

Fearful Investors

Today, we worry about perceived threats to our money. Shakespeare should have said, “Hell hath no fury like a fearful investor.”

And now some stock indexes are down 15–20%+ this year. Inflation and interest rate worries are the main culprits.

In early May, the Fed agreed to raise rates by 0.50%. That set off a spiral of panic about going into a recession. This also triggered margin calls among investment firms, which has cascaded into high levels of deleveraging.

And investors don’t have many options that aren’t getting hit in this environment…

  • Stocks have been hurting because rates are going up…

  • Crypto is also feeling the pain…

  • Gold isn’t acting like a hedge right now…

  • Bonds aren’t keeping up with inflation…

  • And cash, of course, is rapidly losing its value because of inflation.

Many people may feel justified in protesting, “What is happening to my stock portfolio?!”

Don’t get me wrong. This kind of turbulence is excruciating to sit through. And it’s natural to feel anxious when your investments are tumbling.

Yet it’s critical to not get swept up by the current situation and lose sight of the bigger picture.

Overall, we live in the most prosperous, easiest, and healthiest time in human history. And it will only get better as we innovate and advance.

We simply need to be patient and wait for the market to remember this. Now that my system officially shows that we’ve gone oversold (as of May 25), this market turbulence should begin to resolve soon. And we should start seeing a bounce around June 6 if averages hold.

So my advice is as follows:

  1. Conservative investors should buy high-dividend stocks for some income, capital preservation, and even capital appreciation.

  2. Aggressive long-term investors can buy beaten-down profitable tech stocks with sales and earnings growth, high cash, and low debt balance sheets.

But here’s my advice for living a happier, more fulfilled life: stop worrying.

Stress and anxiety take toxic tolls on our mental and physical health. And indulging in our deepest fears over things we can’t control is futile at best. At worst, it’s wasteful of the only true asset we have – time.

So here is some additional advice to help put this into practice:

  1. Invest regardless of what happens to rates. Throughout 100 years, rates and inflation have zig-zagged, but stocks have gone up overall. Set aside savings each month to buy stocks regularly.

  2. Avoid margin (leverage) at all costs. It will make you giddy on the way up but can ruin you on the way down.

Then all that’s left should be enjoyment.

Worrying about inflation, interest rates, COVID (or monkeypox), and war won’t make you richer. Rather, to make yourself richer, enact a stable plan over time and stop stressing.

Just focus on spending the most important asset you have wisely: your time.

As for your investments, it’s only money.

Talk soon,

Jason Bodner
Editor, Outlier Insights