Stocks and bonds falling over 10% at the same time has not happened in nearly 50 years, according to Swiss bank Mirabaud. Lately, however, we have all experienced the very real pain of these two coinciding trends occurring simultaneously. The current broad-based downturn in the financial markets throws a wrench into our “best financial practices” of avoiding rapid losses by creating a diverse investment portfolio, though the loss would be much higher if you did not have some bonds in your portfolio.
As of the end of September, the stock market is down about 21% overall from market highs and the average bond fund is also down—Total Bond Market Index (VBMFX) down 12.12%. At the same time, inflation is now running at 10.9% according to The New York Times.
Just to put current events in perspective, our family’s 70% stock and 30% investment portfolio is down around 20% YTD. Although I am concerned, I am nowhere near panic mode. Historically, the markets always go up again after sharp declines. The question that I don’t have the answer to, however, is when. Our current market trend could turn around on a dime based on unforeseen events or a change in sentiment. But when the worm finally does turn, you want to be able to ride the bull market upward and not be trampled by it as the bulls race past you.
A Review of Recession Survival Steps
Prioritize lowering or eliminating your debt. As interest rates rise, debt becomes very dangerous to your financial future.
Increase your emergency fund.
Work hard to stay within your budget.
Look for ways to create new income streams.
KEEP INVESTING and diversify the investments you purchase. Everything could (and likely will) turn around in a reasonably short period of time.