Hedges and Protections
We are almost through 2022 and what an eventful year! A few months ago we officially entered the “technical” definition of a bear market and also officially entered the “technical” definition of a recession. As we have already advised you in past Ryan Reports, try not to be too triggered or fearful of the technical definitions of “recession” and “bear market.” There are many benefits to understanding these common definitions and getting them out of the way.
We have seen fear, concern, and anxiety in our clients and throughout the public.
Here is a helpful reminder, a little more than 2 years ago in March and April of 2020, at the height of the pandemic panic, the markets were down much further than they are currently. A big difference is that we recovered so quickly and went on to see much higher highs.
I want to remind you that there is nothing happening that is outside of historically normal economic and market events.
Events we have been facing:
-Skyrocketing inflation and fuel prices
-Rising interest rates
-Market downturn & uncertainty
-Escalating housing costs
-Geopolitical concerns (Russia/Ukraine)
When have you ever heard of anything like that? Well, very often all these things are all part of normal economic and market history.
We started to see a market downturn last fall and it has continued throughout this year. Of course many of our clients are anxious and concerned.
Past experience observations:
-These events and periods have commonly occurred.
-These downturns have not lasted.
-Market downturns have frequently been followed by new market highs.
-The media and other fearmongers over-dramatize these conditions.
Now, having said that, people are still anxious. At Strategic Planning Group we have placed protections and hedges into your accounts. For the vast majority of accounts, these protections are in place. They provide substantial downside protection for the next 12 to 18 months.
The underlying instruments use limited barrier downside protection. Which means if the markets and indexes are down (within historically likely amounts), these instruments will not be down. Even better news is that we have not given away upside potential. If markets and indexes are substantially higher in 12-18 months, we will participate in that gain.
Due to logistical limitation, these hedges will not be available in accounts under $25k, taxable accounts with large unrealized capital gains, deferred annuities, some 401k platforms, and portfolios invested after June 26, 2022 or July 28, 2022.
Think of these protections as parachutes, airbags, or even shock absorbers in your portfolio, while still maintaining upside throughout.
With these hedges and protections, we have also side-stepped bond risk for the next 12-18 months. As you all know, bonds do not do as well in periods of rising interest rates.
A better understanding:
-These instruments that we use are not annuities in any form.
-These hedges are backed up by major banks, such as Citibank, Morgan Stanley, and J.P. Morgan, just to name a few.
-We have taken steps to diversify these banks, just like we diversify our other investments.
-This strategy will remove a substantial amount of downside risk.
-As a whole, these positions we have taken will preserve upside potential as well.
I want all of you, our dear friends and clients, to be confident, calm, and focused on the important things in life. Your family, friends, your lifestyle, and your Perfect Calendar®.
I want to remind all of you to disengage from too much media consumption and walk away from stressing over markets and the economy.
Focus on the important things in your lives.
I also want to specifically acknowledge a few things. We know that the current economic and market conditions are stressful to our clients. I just want all of you to be confident and resolute in our long-term strategy. I also want you to have confidence in the recovery from these conditions.
I’ll ask you, what has historically followed bear markets and recessions? That’s right, recovery and new highs.
With that thought and knowing that we have put significant protections in place for you. Relax and let time and patience prevail.