In light of recent market volatility, which has been driven by concerns about the banking sector, we want to provide some timely perspective beyond the headlines found in the media.
On Thursday of last week Silicon Valley Bank (SVB), which is a large West Coast bank specializing in risky venture capital, announced it was not going to be able to continue operations and they would need to receive government assistance. The news rattled markets and caused concerns that other banks may be negatively impacted.
For clients of Total Wealth Planning and who have accounts at Charles Schwab Bank, we are providing additional information available at this link, which explains how Schwab is well protected. Although all investments carry risk, at this point clients likely understand that at Total Wealth Planning we focus on avoiding unnecessary risks. This is the primary reason we have chosen to custody client assets at Charles Schwab, which operates in a conservative manner.
The SVB bank situation, which sparked the extreme volatility in the banking sector, is being handled by the Fed, having stepped in to protect all those bank’s accounts regardless of whether an account holder’s deposits are over the $250,000 FDIC limit. Markets this week appeared to be recognizing this and experienced a rebound over the last few days. Other banks have been in the news, most notable Credit Suisse, and whose share price has been hit particularly hard. Credit Suisse has actually been on a slow decline for a number of years, however. Its share price has dwindled from over $30 a share in 2014 to just above $3 a share as of January, and now down to about $2 per share. This could be a bank that needs to be propped up by the Swiss government or allowed to fail. Importantly, each of these events are not materially impacting client investment portfolios. Further, these events highlight the importance of maintaining a highly diversified portfolio and is how we protect our clients, implementing based upon Nobel-Prize winning research for over thirty years.
Although earlier this week much of the media published headlines such as “Markets Plunge”, when they actually fell about 1% on the day, the markets are in fact in positive territory for the week. In fact, they are up year-to-date and up double digits since October 1st 2022. Our expectation is for continued positive market growth for the coming year. Markets across the globe appear attractively valued, especially after the declines that occurred in the first half of last year. Although there will likely be volatility at times, the chances of a continued, sustained decline over the next year is much less than in other economic scenarios. In fact, since WW II the markets have only experienced back-to-back declines on two occasions — in 1973-1974 and in 2001-2002. During both of these periods, the economy was in much worse shape than it is now, and also valuations were much higher for equities. For additional detail please feel free to visit this link to our 2023 Economic and Investment Outlook which we sent out earlier this year.
Our success over the last thirty years is the result of discipline, both in how we operate our business, and in how we live by our time-tested strategy of placing clients’ interests first. It is why clients have entrusted us to be a good steward with their life savings. We do not take this responsibility lightly.
David D. Wilder, CFP® is a principal and chief investment officer at Total Wealth Planning, a fee-only fiduciary financial planning firm in Cincinnati (Blue Ash), Ohio. With over 30 years of experience, Dave leads the Firm’s Investment Policy Committee and Investment Management Team. As a highly-credentialed MST, CFP®, CTFA, and CEPA, Dave has been featured in numerous industry publications including Yahoo finance, the Business Courier, and Channel 12 Cincinnati News. Dave has been recognized as a Five-Star Advisor through Paladin Registry, a 2008 Reuters Top Advisor, profiled in Bloomberg Business Week magazine, and in 2011 was named one of the Top 50 Most Experienced Advisors in the United States. Dave can be reached at dave@twpteam.com.
