The Retirement Rise 1.16.2023
Companies are Investing, Recessions and Stocks, and What Would You Regret Not Starting?
This Week’s Good Financial News
One of the pillars of the RISE framework is ‘I’ as in “Invest for a better future.”
Well, it seems like businesses are doing just that. According to Sam Ro at TKer, businesses are investing at historical highs. From the article:
Orders for nondefense capital goods excluding aircraft — a.k.a. core capex or business investment — climbed to a near-record $75.2 billion in November.
What exactly is this stuff? It’s all the expensive equipment your company buys so that you and your coworkers can produce the goods and services you sell.
And to be clear, these are orders, which can be canceled. This stuff hasn’t even shipped yet. If the economy were barreling toward a recession, these numbers would not be this high. (Source: TKer)
It looks like companies are investing in their future. Are you?
An Investment Note for Retirees
It seems like everyone is expecting a recession in 2023.
Our take?
From an investment perspective, the prospect of a recession is irrelevant.
In fact, by the time the official recession call has been made, stocks have usually bottomed.
Why?
Well, stocks are forward-looking, always discounting future profits and cash flows in real-time. In contrast, an official recession call from the National Bureau of Economic Research (NBER) looks rear-ward. This is because the NBER retroactively decides whether we have experienced a recession as data come in.
Check out this chart from Dimensional. As you can see, in 2/3rds of the recessions since 1980, the market bottomed before the official announcement of a recession.
A good example is 2020. As Dimensional notes:
In 2020’s recession, for example, the market’s low point came in March, three months before the announcement in June 2020. The takeaway for investors? If and when a recession is declared, we think the most sensible approach is to remain disciplined with one’s asset allocation; reducing exposure to stocks at that point may lead to missing out on brighter days ahead.
We may be headed for a recession. We also may already be in one. The problem is that the analysis isn’t actionable.
What is actionable?
Executing on your financial plan and coordinating your investment portfolio with your near-term and long-term goals. You can do nothing to control the direction of interest rates, inflation, or whether or not we are in a recession.
In other words, focus on what is in your control and fade the rest.
A Thought on Retire on Purpose
A tweet from author Daniel Pink tipped me off to this fantastic article in the Atlantic, Dear Therapist: My Son Has an Impractical, Ridiculous Career Plan.
On the one hand, it’s a masterclass in effective communication with adult children (or communicating with anyone sharing aspirations or exciting plans). But on the other hand, there is a lot to learn about goals and aspirations for any stage of life in the article.
This section stood out to me as particularly relevant to retirees hoping to design a retirement full of fulfillment and purpose:
A common complaint I hear in the therapy room is some version of “I wish I’d tried working in the art world/becoming a chef/writing for television/starting a company when I was younger but I was too scared/talked out of it.” I don’t hear a lot of “I regret that I tried” but I do hear “I regret that I didn’t.” Some might express disappointment that their attempts didn’t pan out, but it’s a different flavor of disappointment from that of not knowing what might have happened had they given their dream a shot. The never knowing—the wondering—is harder to shake.
“I don’t hear a lot of “I regret that I tried” but I do hear “I regret that I didn’t,” she writes.
Wow.
Often we get caught up in thinking that retirement must be our most practical stage of life. Surely, financial, health, and other constraints must be more constricting as we age?
But why is this case?
It may be practical or pragmatic to admit that with all your wisdom, experience, time, and resources, now is the time to be audacious with your goals.
So here’s today’s question for a purposeful retirement:
What would you regret if you didn’t try?
Can you start today?