Welcome Back Riders

My youngest daughter Marin works at Beacon part-time as part of her training for her Physician’s Assistant grad program. Beacon recently had a “Kings Island Day” and I went along with Marin and a couple of her friends.

I grew up about an hour and a half from Cedar Point. We went at least once every summer and it was a highlight each year. We were sure to get there when the park opened and had every intention of staying all day. We strategized about which coasters to ride, and in which order. The goal was to ride as many as possible with the least amount of wait. And when a new ride came out, the anticipation grew. Each new ride provided faster descents and steeper turns. Gemini, Corkscrew and Demon Drop gave way to Magnum and Millenium Force.

When I first got to Cincinnati, Corie and I would head to Kings Island for P&G day and largely repeat the Cedar Point experience. We tried to ride as many rides as we could from The Beast to Top Gun to Italian Job. And like Cedar Point, Kings Island kept “one-upping” itself with bigger, more thrilling rides. P&G day even afforded us the chance to ride our favorite rides without worrying about the wait since the park was only open to P&G families. When Diamondback came out, we could ride in the front car, 2, 3 even 4 times in half an hour. And then we could go do the same on the Beast and Vortex. Crowds were light, and it was easy to ride over and over.

I’m 51 now and something has changed dramatically. Me. Kings Island built their newest coaster, Orion in 2020. When you get to the top of the first hill, you look down on Diamondback, the Eifel Tower and the giant swings. The first hill is a 300’ drop and goes 91 MPH. It’s also an incredibly smooth ride. A true engineering feat. And yet, when Marin, Natalie, Emma and I went a couple weeks ago, I rode it twice and had enough. We walked over to Diamondback, rode in the front, and I was done for the day. Ready to go watch Joe Burrow and Company. I wasn’t sick, but I was a bit light-headed. The exhilaration of that first hill is still a rush, but ultimately, I can’t handle the ups and downs like I used to. I tend to wax philosophical and realize that I enter and exit the loading station at the same level, yet in between they whip me around like a pinball. The bumpers are getting less flexible.

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I’m sure you’ve figured out by now that getting whipped around by a roller coaster and ending up back where you started is an analogy for the markets. Heck, entering my 5th decade on the planet, it’s become an analogy for a lot of things in our world. Just this past week, Hamas attacked Israel. One of my first memories of politics was the Camp David Accords struck by Egypt, Israel and the US to bring peace between the Arabs and the Israeli’s. Just last night I read the tail end of the biography “Einstein”. One of the surprises in the book was his outspoken opinion on setting up Israel as a Jewish state. And this was back in the late 40’s. I don’t intend to weigh in on who’s right or wrong in that conflict, and from a market perspective, it may have limited impact unless the region’s oil interests become more directly involved. The point is that sometimes, the more things change, the more they stay the same.

Which brings me back to the market. Let’s use an example. The Fidelity Growth Fund has $47 billion in management. Like most growth funds, it holds Apple, Microsoft, Amazon, Google, Netflix and other growthy companies we all know. In 2023, it is up an eye-popping 23%. Holy cow!

Now let’s go back to 2022. -33%. It lost 1/3 of its value in 2022! That’s a bear market by any measure.

And what’s confusing with the way percentages work is that -33% followed by +23% isn’t -10%, it’s -19%.

What’s made this environment even more challenging is that bonds and stocks have moved down in lockstep which has made the traditional portfolio of 60% stocks and 40% bonds less successful than in the past at dampening volatility in returns. Again, think of the ups and downs of a roller coaster. In the following chart, you can see that from 2009 to 2020, stocks and bonds both went up (remember, bond prices go up when their yield or interest rate fall).

In the last two years, bonds and stocks have moved down together.

You might be asking, why not just sell stocks and go completely to Treasuries? We certainly have moved away from bond mutual funds and ETFs that invest in long-term bonds. Those bonds have really struggled as interest rates rise. We’ve largely landed on Treasuries, CDs and short-term bond funds for that portion of the portfolio. While that is an outstanding way to get 5% on the bond part of the portfolio, if the market goes up, we all want to participate in that upside. After all, despite all the last 2 years and all the “reasons to sell”, the S&P 500 is up 9.9% a year each year for more than 30 years:

In a nutshell, we continue to look for ways to invest in baskets of stocks and bonds that provide us a great ride without all the ups and downs. We don’t want to get whipped around and end up lightheaded when we’re back in the station. Otherwise, we might all tire of the PA announcer saying “welcome back riders” and just go to “Kiddie Land”.

If you are interested in learning more, give me a call at 513-768-2238 or email me at jared@kellettwealth.com

What’s your financial story?

Jared

Brian Kellett, brian@kellettschaffner.com. Phone 513-312-6067

Dave Bodnar, david@kellettschaffner.com. Phone 513-258-6973

Jared Kline, jared@kellettschaffner.com. Phone 513-768-2238

Kellett Wealth Advisors LLC is a Registered Investment Adviser. Advisory services are only offered to clients or prospective clients where Kellett Wealth Advisors LLC and its representatives are properly licensed or exempt from licensure. This website is solely for informational purposes. Past performance is no guarantee of future returns. Investing involves risk and possible loss of principal capital. No advice may be rendered by Kellett Wealth Advisors LLC unless a client service agreement is in place.