A Great Bear Market Experience

From Leonard's Desk

2018 year end reports are now posted in Morningstar and will tell you what you probably already know – an “unofficial” bear market descended on stocks in the fourth quarter of 2018 despite ongoing strength in the US and other economies, and in early 2019 we are seeing weakening of some economies. Similar to 2009, when the economy was very weak and stocks were very strong (currently it’s the opposite: strong economy, weak stocks), there is not necessarily a short term correlation between stock market performance and economic performance. In the first week of 2019, stocks have rebounded strongly, and it's not possible to say for certain whether we have entered a long term bear market. Regardless, I've decided to take the step of preparing clients now for a bear market, whether it has arrived or not.

Many studies show that investors do great harm to their long term best interests during bear markets by acting emotionally and impulsively to sell their securities to others at low prices. I have been through numerous bear markets and my behavior is always the same: avoid focusing on my account balances (which I avoid even during a bull market), and look to buy additional ownership in stocks at good prices. This behavior has rewarded me well over three decades as an investor.

At New Capital, if there is a bear market then we are at least focused on providing for you a "great bear market experience." While almost any advisor can look good during bull markets; we aim for greatness as well during bear markets. We amplify our communications, financial planning, and investment activities; work extremely hard to be available to you and empathetic with you; and try to take advantage of the opportunities often afforded by lower market prices and higher future returns.

Here are the details around these ideas:

Communications
We are dedicated to communicating with you regularly and consistently, and we continue to enhance these offerings:

  • Our new website debuted at the end of last year and is terrific. Of particular note for is the Client Dashboard, a page that contains quick and easy access to our resources (please take a moment to bookmark it in your browser)

  • Financial Planning Center contains detailed articles about specific financial planning techniques and advice, available to you 24 hours a day

  • The New Capital Journal, our new online financial newspaper, is our “daily” financial news and information resource. We have subscribed you automatically to receive the Journal to your inbox (though you may opt out if you wish).

  • Our regular newsletter (such as this one) remains a popular read for many clients and contains our most important communications in a single mailing.

  • Our quarterly reports available on Morningstar include details on your accounts as well as a comprehensive review of markets. Whether you want to know how a particular account or a particular security has performed, it is all there.

  • On January 17 we will hold a webinar entitled “Bear Market Survival Guide” – see below. Our webinars have grown in popularity and received good reviews from clients.

  • Our annual conference in October has grown steadily larger and is a way for clients to spend a few hours with us getting detailed perspectives and information

  • As always we remain available to you via your communication method of choice - meeting, phone call, email, text - and you can even now schedule meetings on the Client Dashboard.

Financial Planning
There are many reasons why detailed financial planning is a central service that we provide to clients, and one of them is so that we can run bear market stress tests on your plan. During bear markets, clients often want to know: “Am I still OK?” We can run updates and stress tests on your plan at any time, and we can also give you your own login to Moneyguide for you to view reports or perform other operations. If you are interested in a plan update or stress test, just let us know and we can schedule it with you. An updated plan with a high probability score is the “gold standard” of assurance and confidence at any time, including during a bear market.

Portfolio

In more volatile markets, prices move with greater swings and magnitude, and we are therefore alert to moments when we can take advantage of this by buying securities at lower prices. With our portfolio re-balancing technology, we are able to quickly place trades across our entire practice to enable all clients to benefit from such trades and either put cash to work more productively or exchange securities for others we think are better investments at the time.

We are working on other innovations that we hope to release in the coming months including new Investment Policy Statements, a comprehensive client information portal, a client market behavioral tracking system, and even a guided money meditation to help clients achieve financial calm and gratitude.

Whether a bear market is here or not, New Capital is here. If we can be of service to you in any way, at any time, please let us know.

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