Balanced Tension: How Sir Isaac Newton’s Third Law Of Motion Seems To Be In Play Today
Investment Perspectives: Q4, 2022
Chief Executive Officer, Founder
Todd Sixt is the CEO of Strait & Sound. He is a successful and seasoned leader of financial service teams. His focus is to ensure Strait & Sound’s clients are provided with a first-class experience and that the work delivered by our people is unsurpassed in the financial services industry. At his core, he believes in excellence.
Sir Isaac Newton’s third law of motion holds that for every action there is an equal and opposite reaction. I think that’s a pretty accurate description of what I see today. Here’s why I say this. Republicans were supposed to sweep midterm elections, but the red wave didn’t happen. The war in Ukraine was projected to be a quick victory for Russia. Instead, it’s become a protracted exercise in outside powers seeking to check Russia’s military aggression.
There is real hope that the COVID 19 pandemic will finally end. Yet, infections, hospitalizations and unfortunately death are still with us and will likely remain for some time. A deep recession has been prognosticated for some time now, but it hasn’t happened. Inflation has eroded buying power even as the Federal Reserve raises interest rates to curb it. Yup. It pretty much looks to me like powerful forces are chiding against each other to maintain balance. So why does this make me feel so good about the future?
Health, Stability, Freedom And Prosperity
As I think about all that has happened over the last several years, I come away with one overriding impression. Human beings on this planet really want four things right now: health, stability, freedom and prosperity. Sometimes, to realize all four of those, forces will be in balanced tension against each other. This is a good thing because it prevents out-of-control downward spirals. That gives me hope for the future: a future where families can work hard, live beneath their means, take a long-term view of things and invest to realize their dreams. Let me give you some examples of how I see balanced tension working today to protect our interests:
- COVID 19 has been the single biggest assault on human health that we’ve seen in 100 years. Yet, through vaccinations, social distancing and vigilance, we’ve mitigated it and will defeat it in the future.
- The voices and perspectives that led to the January 6 insurrection were roundly rejected in this last election. This sent a message to elected officials: we want stability, not radical polarization.
- As COVID 19 shutdowns have lifted in the US and Europe, people are once again flying, driving, taking cruises and enjoying the company of friends and family. Have you heard of revenge travel? Many people in China are openly protesting no-end-in-sight lock-down measures that restrict their freedoms.
- Numerous factors contributed to rising inflation. Personal spending power eroded as family staples became more expensive. To counter inflation, the Federal Reserve has increased interest rates at a steady clip. Will this work? Time will tell. But so far, the results are encouraging.
My point here is simply this. Every time a force or event arises that could undermine our long-term interests, another force seems to arise to mitigate the damaging effects. I see this as inherently good news for the long-term investor who has a solid plan, sticks to the plan and makes smart pivots at the right time. I believe foolish investors will run for the hills out of fear, converting most of their portfolio to cash and seeking to get back in the markets later. I don’t believe that makes sense and here’s why.
There is no secret sauce to building wealth through investing. The underlying principle is simple: buy low—sell high. I do not believe that this is the right time to sell, for most investors, unless their plan from decades ago dictates that this is the right time. So my advice is equally simple. Have a plan and stick to it over time because that’s how meaningful long-term prosperity is achieved for most families.
Of course, I cannot predict the future and if things were to take a sudden turn, we would be in consultation with you to make necessary pivots. But based on everything I can see today, I very much doubt that would be necessary.