Bonds are down by -26.5%. Stocks Dropped by a Third.
A review of stocks, bonds, real estate, crypto, gold and silver in 2022.
If you thought your stock performance was hard to look at, take a look at the performance of long-term Treasury bonds in 2022.
As you can see in the one-year performance chart above, long-term government bonds were some of the worst performers of the year, with lost value of -26.08% (source: Morningstar Direct). The Pimco BOND ETF sank -16.5%. Bonds are supposed to be the safe side of your portfolio in normal bear markets. Clearly, we’re not in normal times. Since long-term bonds lost more than the S&P500® in 2022, protecting the safe side is as important as our stocks and funds.
There are solutions for the safe side. It’s important to know what’s safe in a Debt World. (Keep reading.) You might start by checking out my Yield is Back blog and videoconference.
As you can see in the chart at the top of this blog, most assets were losers. It was just a question of how much.
Although real estate is likely to pull out of 2022 with year-over-year gains, prices are down -11% from the June 2022 highs. The cities that ran up the highest in 2021 have seen the largest price downturns and rising inventory. There will continue to be reports and press releases that emphasize year-over-year gains in real estate that exclude the downtrend.
Gold was flat, while silver attempted a quiet rally. The technology and biotech heavy NASDAQ Composite Index dropped -33% in 2022.
Should You Just Wait and See?
Or is now the time to protect your wealth? What’s at stake?
In 21st Century recessions, Buy & Hope investors can lose up to half of their wealth before they realize it. Stocks dropped almost 40% in just four weeks in March 2020, in the early days of the pandemic. The Dow Jones Industrial Average bottomed out at 6,547 on March 9, 2009, a loss of -55%. It can then take 8-15 years to crawl back to even. Meanwhile, life is rough and your FICO score is in the toilet. A 21st Century strategy that works is proper diversification, annual rebalancing, and making sure that your safe side isn’t vulnerable – knowing what is safe in a world of inflation, leverage and rising interest rates. That system is as easy as a pie chart.
It’s very important to always have an appropriate portion of your wealth protected from losses. As we get closer to retirement, we can’t afford to lose principal. We need to keep our nest egg intact. So, we start by always keeping a percentage equal to our age safe. Overweight an additional amount of our wealth safe when we see economic storms, like a recession, on the horizon. You can personalize your own sample pie chart using our free web app. Email info@NataliePace.com with WEB APPS in the subject line for a link.
Another key strategy is regular rebalancing to capture gains – once, twice or three times a year. This helps us to sell high when an asset has been a super performer, and buy low when stocks are finally on sale again. Market timing doesn’t work.
As you can see from the Buffett Indicator below, which is a measure of total stock value compared to GDP, stocks are still very expensive. This is yet another indicator that getting properly diversified and protecting our wealth now is very important.
It's Not Too Late
If we wait for the headlines that we’re in a recession, it’s too late to protect our wealth. The official announcement doesn’t come until stocks have almost hit rock bottom. It may feel like stocks have dropped a lot. However, in the context of the other 21st Century recessions, if history repeats itself, they could drop another 30% or more than they already have.
Additionally, proper diversification means that we can select a few funds that could go up if stocks sink. We’ve seen a quiet rally in silver, while gold has been quite resilient. It’s easy to add a gold or silver fund to one of our hot slices. Utilities and consumer staples tend to be more buoyant. Some countries in the world are expected to have a stronger economy in 2022, and many are paying dividends.
Long-term bonds lose value as interest rates rise, and are at risk of illiquidity. In a recession, creditworthiness typically erodes. Our mantra for bonds is to keep the terms short, the creditworthiness high and to ladder them. There are a number of other assets to consider that could preserve our wealth, while offering a safe yield.
Take Our Wealth Challenge
Add up everything you have in your retirement accounts, savings, brokerage accounts, etc. Once you get the total, divide it by half. Then ask yourself, "Am I really willing to risk losing half of my wealth? Should I have blind faith that someone else is protecting my future? Or is now the time to be the boss of my money and know exactly what I own and why, and what a time-proven plan looks like?" (Again, that plan is easy-as-a-pie-chart.) 401ks and RSPs have more restrictive policies. However, a carefully-crafted plan can be constructed even with those constraints.
Even if you’re feeling equity rich or that you have a "conservative" allocation in your portfolio, you are likely at risk of devastating losses with the added horror of being invested in illiquid assets where you cannot access your money or make changes without losing a lot. Conservative allocations typically concentrate their investments in long-term bonds, and can hold up to 20% of junk bonds to boot.
Buy & Hope Doesn't Work.
When you lose more than half, then you have to spend the bull markets praying and hoping you’ll crawl back to even. That is not a plan. That's a Wall Street rollercoaster.
A Time-Proven, 21st Century Plan
When you properly diversify your wealth, you can protect yourself from losses in the downturns, and build more wealth during the bull markets. Regular rebalancing with proper diversification is an easy, buy low, sell high plan on auto-pilot.
Those who used Natalie Pace’s easy, affordable strategies earned gains in the Dot Com and Great Recessions and outperformed the bull markets in between, using less time and money than most people spend. Click to watch Nilo Bolden’s testimonial. Email info@NataliePace.com if you’d like to read more feedback and testimonials from attendees, economists and other VIPs.
Learn the Life Math that We All Should Have Received in High School
We have many free and low-cost resources for anyone who desires to adopt a Thrive Budget, to protect their wealth, to send their teen to college for a better degree at half the cost, and to save thousands annually with smarter energy choices. Email info@NataliePace.com if you are interested in receiving links to Natalie Pace’s podcasts, blogs, books and videoconferences on these topics. Just indicate the subject you’re interested in.
If you’d like to learn and implement our time-proven 21st Century wealth plan now, register to attend our Jan. 20-22, 2023 Financial Freedom Retreat. You can also order a detailed unbiased 2nd opinion on your current portfolio from me personally (through our private coaching program). Do you have a recession-proof plan in place, in case there is a recession in 2023 (like most analysts are predicting)? Email info@NataliePace.com or call 310-430-2397 now.
Yes. The Next Recession Could Be Worse Than the Great Recession.
The mainstream headlines are leaning into the narrative that we could have a soft landing, rather than a full-blown recession. However, few are looking at the prices of stocks and the massive leverage in debt. (However, many of us receive emails telling us that the dollar is going to become worthless and that central banks are going to fail.) According to the Buffett Indicator, stocks are more expensive than they were in the Dot Com Recession, when the NASDAQ Composite Index dropped by 78%. Using the CAPE ratio, stocks are higher-priced than during the Great Recession, when the Dow Jones industrial Average sank 55%.
Debt is significantly higher than it was in the Great Recession when banks had to be bailed out. If you’re worried about holding too much cash, there are solutions that promote family wealth, rather than putting your currency at risk of a Crypto Winter. (We discuss crypto at the retreat, too.)
We spend one full day on What’s Safe at our Investor Educational Retreats. You can protect your assets, provide far better for your future and even save thousands of dollars in annual budget savings using our safe strategies.
“We asked Natalie Pace for a second opinion on our investment portfolio. She researched and reviewed each stock and fund. She then explained to us in plain English how we were positioned in the market and how high our risk exposure was. Her knowledge was so profound that we decided to take her retreat in Arizona. My husband was still quite skeptical, but 20 minutes into the retreat he turned to me and said "Thank you." Stocks and investing are no longer rocket science. We are finally able to take control of our money. We give thanks just about every day that we met Natalie. I feel like I live on a different planet. It's been a summer of miracles. Natalie contributed greatly to this. She added sanity and peace to my life. I am forever grateful.” AC & AM
Wisdom is the cure.
Natalie Wynne Pace is an Advocate for Sustainability, Financial Literacy & Women's Empowerment. Natalie is the bestselling author of The Power of 8 Billion: It's Up to Us and is the co-creator of the Earth Gratitude Project. She has been ranked as a No. 1 stock picker, above over 835 A-list pundits, by an independent tracking agency (TipsTraders). Her book The ABCs of Money remained at or near the #1 Investing Basics e-book on Amazon for over 3 years (in its vertical), with over 120,000 downloads and a mean 5-star ranking. The 5th edition of The ABCs of Money was released on September 17, 2021.
Natalie Pace's easy as a pie chart nest egg strategies earned gains in the last two recessions and have outperformed the bull markets in between. That is why her Investor Educational Retreats, books and private coaching are enthusiastically recommended by Nobel Prize winning economist Gary S. Becker, TD AMERITRADE chairman Joe Moglia, Kay Koplovitz and many Main Street investors who have transformed their lives using her Thrive Budget and investing strategies. Click to view a video testimonial from Nilo Bolden.
Check out Natalie Pace's Apple Podcast.
Watch videoconferences and webinars on Youtube.
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Please note: Natalie Pace does not act or operate like a broker. She reports on financial news, and is one of the most trusted sources of financial literacy, education and forensic analysis in the world. Natalie Pace educates and informs individual investors to give investors a competitive edge in their personal decision-making. Any publicly traded companies or funds mentioned by Natalie Pace are not intended to be buy or sell recommendations.
ALWAYS do your research and consult an experienced, reputable financial professional before buying or selling any security, and consider your long-term goals and strategies. Investors should NOT be all in on any asset class or individual stocks. Your retirement plan should reflect a diversified strategy, which has been designed with the assistance of a financial professional who is familiar with your goals, risk tolerance, tax needs and more. The "trading" portion of your portfolio should be a very small part of your investment strategy, and the amount of money you invest into individual companies should never be greater than your experience, wisdom, knowledge and patience.
Information has been obtained from sources believed to be reliable. However, NataliePace.com does not warrant its completeness or accuracy. Opinions constitute our judgment as of the date of this publication and are subject to change without notice. This material is not intended as an offer or solicitation for the purchase or sale of any financial instrument. Securities, financial instruments or strategies mentioned herein may not be suitable for all investors.
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Natalie Pace is the co-creator of the Earth Gratitude Project and the author of The Power of 8 Billion: It's Up to Us, The ABCs of Money, The ABCs of Money for College, The Gratitude Game and Put Your Money Where Your Heart Is. She is a repeat guest & speaker on national news shows and stages. She has been ranked the No. 1 stock picker, above over 830 A-list pundits, by an independent tracking agency, and has been saving homes and nest eggs since 1999.