This summer my family took a trip to Sunriver, OR to relax and swim at the pool there. In the past when we’ve gone, I’ve attempted to ride my road bike from Sunriver up to Mt. Bachelor. It’s a brutal ride and I’ve made it all the way up once or twice. This year I took a bike for my 13-year-old and dared him to try the uphill 20 mile ride with me. Somehow, I convinced him to wake up early and go for it.
As we pedaled up the hill I was concerned Henry wouldn’t make it. I kept telling him, “It’s ok, we can turn back anytime, buddy.” But at mile 15 I was concerned I wasn’t going to make it! You can see whose leading in the pictures. Then at mile 18 I was saying, “No turning back now, dude!!”
Even though I’m gettin a little old and he’s a little young… WE CRUSHED IT! Honestly, I couldn’t believe we both made it.
Guess how you should be feeling today? You should feel the same way that I did up at Mt. Bachelor, because YOU’RE CRUSHING IT! Or at least your investment account is.
The obnoxious chart above is the 25% return of the stock market since April 9th, when I wrote my last letter encouraging everyone to try and be optimistic amidst the negativity. You can read it here if you like.
I wrote about how ugly the stock market was because of the sweeping tariffs the current administration put in place. The stock market had just dropped 20% and we had a heck of a hill to climb to get out of that. Three months later we’ve made it up the hill. The market is making new highs every day and the drop we experienced is a distant memory.
Honestly, I can’t believe we made it… so quickly. I’m always hopeful the market will bounce, so we look to buy when stocks sell off like they did. For those that had cash available we bought literally seconds before Trump paused the tariffs and stocks took off.
Stocks have continued higher because of the trade agreements being negotiated. Inflation has been a concern, but the most recent government data shows the annual inflation rate is around 2.7%. This is a significant improvement from the highs we saw a couple of years ago.
While things are looking positive now, and I’m grateful for the bounce, I’m skeptical it will last. Which is why we need to celebrate making it up this hill, because now I’m wondering how long before it turns the other direction.
Down the Mountain
The ride back to Sunriver was down hill the whole way and took about half the time. The ride down in stocks is also typically much faster than the climb. The old saying is – stocks take the stairs up, but the elevator down. Knowing that, now is the time we need to prepare for the ride down. The way we’re doing that is to pare back our exposure to stocks.
In the Growth Stock Portfolio where we trade more often, we’ve sold several positions since April: Ford, Carmax, Target, and United Health. We believe with the stock market at all time highs, it’s time to reduce risk in this portfolio and wait for another opportunity to buy. The proceeds of those sales have been stuffed away in a money market fund earning some interest while we wait for the inevitable pullback.
For those invested in mutual funds or in a retirement plan, there’s not much to do. We celebrate the new highs in our accounts, but we must remember, it’s perfectly normal for stocks to go down occasionally – even healthy. When stocks only go up it can create a stock bubble that can be much more problematic when it bursts.
So bring on the ride down! Don’t worry, I’ll talk you through it when it happens.
Schwab Lawsuit
If you had an account at TD Ameritrade, you’ve likely gotten a class-action lawsuit notice about a settlement that’s been reached regarding the merger from TD Ameritrade to Schwab. There’s nothing that needs to be done with this. It’s just notifying you of the action and that you are already entered into the claim. Our experience with the merger was positive. We had no complaints and think Schwab handled it well. I even wrote a blog post called No Prob With Schwab that you can read if you like.
That’s all we got! We hope everyone is having a fantastic summer! Please contact us if we can do anything for you.
Thanks for reading,
Tim Porter, CFP®