Search Shepherd wealth Partners


Is the Coast Clear?

Unless you live in Georgia, we’ve actually made it through the elections!  Most races have been called, some things have been decided, and little is known about what the next four years will actually look like.  So far it would seem that investors aren’t terribly scared of a Biden presidency and are hopeful that a vaccine will somehow restore some normalcy to life and save many others.  But I’m getting lots of questions on what I think the markets will do from here, whether we should get more into the market or pull out of the market, etc.

The bad news is that there is literally no one that knows the answers to these questions.  Predictions are bountiful; wisdom can be much more elusive however.  The good news is that God is not surprised by any of it, and He knows exactly what the future holds and is totally in control.  And while we may (or may not) believe that in our heart of hearts, we still have to make decisions regarding our investments, tax planning and other financial matters.  As I’ve pondered these issues and looked to wise counsel and God’s word, here are some of my own personal convictions:

Stocks seem to be risky, but bonds may be even riskier

We can put relative prices on stocks by various measures, such as the price/earnings ratio, etc.  When we look at many of these gauges, they are almost all pointing to the fact that stocks are a bit pricey right now.  And when stocks are pricey, that can be a big headwind for the following years.  Prices can continue to increase, but there’s just a bit more downside risk than normal.

However, interest rates are so historically low, that the main alternative to stocks, bonds, are even riskier relative to their norm.  Bonds won’t be producing much income over the next few years, and if rates increase from here, your bonds can begin to lose value.  Savings accounts look just as depressing.

The good news for bonds is that the Fed has shown they have every intention of artificially keeping rates low for several years, so the main risk is not necessarily losing a lot of money but more so in just failing to make any income and likely not even keeping up with inflation.  This has a real-life impact of losing money even if your balance sheet doesn’t reflect it.

The good news for stocks is that while they may be overpriced, even a reversion to historical averages still allows them to average a positive return.  It might not be 8-10% a year, but if you have several years before you need the funds, you’re almost certainly to earn more money in stocks than in bonds over the years to come.  So treat stocks like the bull they’re symbolized by: an animal that can be a tremendous worker on your behalf, but also one that can gore you if you’re not careful!

The only thing certain is uncertainty

Speaking of being almost certain of things, I’m more convinced than ever that we can just expect a continued environment of uncertainty and volatility going forward.  No matter what you think of the election results, the world still remains at a heightened sense of overreaction to everything.  It seems that our dials are set at a “7”, so moving up to a “10” on the freak-out scale doesn’t take much effort at all.

The positive news on this conviction is that volatility and freaking-out is what enables stocks to continue to increase in price over time.  Taking appropriate risks is rewarded over a long period of time, so it’s okay to let the world panic and over-react to things if you can keep a level head throughout it all.

The best thing you can do is limit your intake of news feeds, stay away from social media fist fights, and soak yourself  in the Truth so that you are able to spot the lies.

Your job is not to know the future or to get every decision right

So what are we to do with all of this uncertainty?  For me the answer is to stop trying to control things I can’t control.  God uses the uncertainty to force us to lean into Him, as we quickly realize that the number of things we actually can control are surprisingly little.  In fact, just about the only thing I can control is myself.  Knowing that takes a lot of the pressure off.  Pressure from pleasing other people, predicting the stock market, or getting all of the decisions of life right.  Rather, can I flee from anxiety, love people well, and experience more contentment and generosity.  These things are fully in my control and will result in way more peace and joy than an increased IRA account.

As always, we’re here to talk over any of these topics (although who isn’t tired of talking about the election!) or anything else.  Thanks for allowing us to walk with you through the challenges of wealth and be your trusted advisor.  Blessings on the journey!