As financial advisors and clients start to dive into holiday mode, and 2022 sneaks up, there are numerous factors impacting how the markets function.
As experienced advisors know, many clients use their free time in late December to look inward.
Even if you use a third-party service to do your investment strategy work for you, at the end of the day, the client is looking to you as their guide.
Either way, inflation is a more active topic than it has been in a long time.
As always, the biggest issue for your clients may not be the announced inflation level itself.
While a so-called “taper” of that program may not mean much in relative dollars, given the Fed’s bloated balance sheet, it has the potential to be an emotional pivot point for the markets.
Either bond portfolios will earn low positive returns, they will lose a little or they will lose a lot.
However, advisors want to be careful in their communication, given the charged political climate that has enveloped Americans for decades.
But many retail investors are concluding that they can invest their money the way you do for them, and for much lower cost.
And while these investors may not have been through an extended bear market cycle for stocks or bonds, and may not know what they don’t know, you cannot count on them to come running to you after the next bear market.
You may look at this as a deceptive lack of diversification.
This reality opens up you and your clients to a wide array of spin techniques from Wall Street firms, which can use the chaotic patterns in these figures to try to say whatever fits their agenda.
Just ask happy Bitcoin investors.
However, it is far from the only way for them to add some high-risk, high-return potential assets to a slice of their portfolio.
Do your research and don’t overdo it in terms of how much you allocate to these attempts to profit from unusually strong investor sentiment.
That concept has fed on itself for a couple of decades, and it has created an environment where any company, no matter how solid and sustainable, can see its stock price drop by 10% or more in reaction to quarterly earnings announcements.
Naturally, there are always folks who will try to justify market valuation levels as reasonable or even inexpensive.
As with so many items on this list, it’s all good until the market masses decide it’s a problem.