Just in the 21^st century, we have seen market agitating events like the Dot-Com Bubble Burst, 9/11, U.S. invasion of Iraq and Afghanistan, the Global Financial Crisis, the Covid-19 Pandemic, and now the war in Ukraine. Over this time period, the S&P 500 (U.S. Large Cap Equity Index) has had 8 unique drawdowns of 10% or greater, including a maximum drawdown of 55.3%, yet has delivered a total annualized return of 7.1%. Every year presents dozens of reasons to sell, as illustrated below. It might seem like it is a good time to de-risk, take some money off the table, ignore your long-term plan, and wait for calmer times. Who could blame you? Sticking to your plan and keeping a long-term view by staying invested is hard, especially when the market is dropping. After each subsequent drop, the decision not to change your investment strategy might seem increasingly regrettable. Everything appears obvious in hindsight.

In honor of Financial Literacy Month, we will be discussing a series of topics to help equip you with the tools needed to develop healthy financial habits, understand your financial position, and identify goals to work toward. Part Two will focus on helping you understand your net worth and using that to create long-term financial goals.

Why Net Worth Matters

Your finances are holistic and affect many aspects of your life. Your net worth is used in determining proper insurance coverage, creditworthiness, and as an overall barometer of your financial health. Understanding it can help you set long-term goals to maximize your financial freedom and minimize future financial worry.

2022 has been challenging for investors. Equities and bonds sold off, fears of prolonged inflation, rising interest rates, and the war in Ukraine have left investors feeling uncertain. The situation in Ukraine will likely have effects across the globe, with one of these effects being an increase in commodity prices due to sanctions against Russia. However, there has been some positive news. The world continues to open up, which has been good for businesses, supply chains, and investors. The U.S. Real GDP is still in line with its long-term growth rate, and the U.S. economy added even more jobs in March. The CPI rose to 7.9% YoY in March, the largest increase since the early 1980s. Even though inflation is still rising, it should start to slow as the Fed raises interest rates. The Fed raised the Fed Funds Rate by 25 basis points in March, the first-rate hike since 2018. Oil prices spiked in mid-March and then dropped at the end of the month. President Biden has also announced the potential release of 1 million barrels of oil per day from the U.S. Strategic Oil Reserve and is pressuring oil companies to lower prices for consumers.