By Ted Schwartz, CFP®

From March of 2009 until 2015, the stock market climbed a “wall of worry”, rising dramatically throughout the six-year period. In the wake of the strongest financial crisis since the Great Depression, we experienced great unknowns as we embarked on unprecedented government policies to stimulate the economy. This process was a slow recovery, as banks were reluctant to grant loans, and we were forced to face many other issues that caused a great level of economic uncertainty. Throughout it all, the market shrugged off the concerns, slowly ascending with little volatility as it marched towards ever loftier valuations of assets.

Since the middle of 2015, we have been in a downward spiral of decreasing markets and increasing volatility. Falling energy prices have gone from a positive for consumers to a negative for the economy. Slowing growth in China, ending government stimulation, and a general sense of unease have all steered the market downwards. It appears that we no longer have the ability to climb the wall of worry that remains in front of us.

Investing for the Long Haul

We are not sure what will turn markets and cause them to rebound from the doldrums. We are certain; however, that the fundamentals of investing have not changed and will not change. Stripped of emotions, you are investing now in order to receive a future income stream from your money. Reassuringly, the income stream you can expect from your investments is certainly higher now than it was at the beginning of 2015. With about half of all stocks having fallen 20% or more from their highs, both the dividends and valuations look pretty attractive for the long haul. That is the key for us. While stock prices are driven by emotions in the short-term, they are guided by earnings, dividends, and growth in the long run.

At Capstone, we think now is a great time to lock in cash flow to your portfolio. If you can add investments with attractive interest and dividends (especially dividends that are likely to grow over time), you can use that cash flow to help survive the current market turbulence and set yourself up well for the future. While markets are volatile and emotional over the course of shorter time periods, dividends and interest are surprisingly stable throughout market cycles.

If you can concentrate more on the cash flow (and pay less attention to the short-term market mayhem), we believe you will be richly rewarded in the long haul. As the famous investor Sir John Templeton pointed out, you want to buy investments at the “point of maximum pessimism”, which is where we seem to be now. It’s possible for things to get worse (there is no certainty of market emotions being reigned in before the damage escalates) but….we are somewhere in the area of making good long-term investments. It is a good time for contrarian investors to climb the wall of worry.