Ted's Talk: Courage and Positivity in Difficult Times

Dear Friends,

As I reflect on Q1 of 2022, my thoughts in writing to you all is first, it’s never easy, and second, if it’s not one thing, it’s something else.

After about two and a half years, the progress and statistical improvement on the pandemic have finally become more favorable than we've seen in quite some time – but I do think we must remain cautious with its impact on our economy for a few more quarters. The unanswered question in the back of my mind is whether there will be another spike in cases or another variant to combat.

Unfortunately, as we start feeling less anxiety about the pandemic, new stressors have come into play:

1. Continued supply chain issues

2. Inflation rates we haven’t experienced in over 40 years.

3. The unprovoked invasion by one of the remaining world superpowers on a neighboring country.

4. The threat of a global conflict increasing from geopolitical pressures.

5. Labor shortages faced by small and large businesses alike.

There certainly are more things to consider, but the problems we face don’t have easy solutions. There are always challenges we face – it’s just a matter of which ones come to the forefront at any given time.

It’s also not easy to stay positive in times like these due to current world events. But, one surprising factor is that the West has become more unified than it has been in decades while countering the onslaught by Russia against Ukraine. With Ukraine not being a member of NATO, turning back the Russian threat is indeed a balancing act.

Many countries are acting by issuing tough economic sanctions as a deterrent in the hopes of preserving a young democracy. The business community has also stepped up to the plate by divesting holdings and severing economic ties with those responsible for Russian aggression. At this point, I’m thankful the War in Ukraine has been confined so far and has not spread outside the two countries involved.

In the middle of all this, the Federal Reserve has been put in a precarious position in dealing with economic conditions here at home. Inflation has had a profound impact on Americans’ financial wellbeing, but at the same time, the good news is inflation has not curtailed the post-pandemic growth we’ve experienced recently. Amid a very fickle labor market, and during a period of unprecedented spending by the federal government, the United States is learning to adapt to the issues at hand.

While reflecting on the current state of the financial markets, I find myself sitting back and thinking of the Mountain Chart. This chart lists out all the major challenges we’ve faced economically – the Great Depression, The Great Recession, stock market corrections, conflicts between nations, and many more challenges we’ve experienced. Somehow, we always get through it. The chart also shows the dramatic growth of a $10,000 investment if you’ve stayed invested through thick and thin – it’s actually quite remarkable. (See Mountain Chart).

In the short-term, these difficult moments may seem like they’re the worst, but in looking back, they all end up being a blip on the financial radar so to speak over an extended period of time.

In closing, my best advice is to take a deep breath. Have the courage and positivity to look at your financial situation for the long run. Certainly, consider your time horizon, your risk tolerance, and whether you are properly diversified. Remember, you are not alone as we try and manage unprecedented and historical jolts on the markets. I’m confident in IEM’s investment portfolios and we’re always here to answer questions you may have.

~ Edward “Ted” Smith