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After two solid years of strong returns, equity markets are currently experiencing a significant downfall in 2022.

While it’s always possible equity markets could turn upward quickly, an equity downturn experience can leave an extensive impact on the psyche of even the most seasoned of investors and consequently impact how they manage their money. During downturns, some investors become too traumatized to put their cash to work in the markets. Others can react by aggressively day trading and making rash investment decisions. Neither of these behaviors are beneficial for long-term financial success. For long term financial success, incorporating a proper process-oriented approach for managing investments is typically one of the better ways to avoid similar missteps.

Understanding the key factors that are contributing to 2022’s bumpy ride can be helpful. Surging inflation, rising interest rates, the Ukraine/Russia war, and continued COVID lockdowns in China that are restricting the supply chain are all influencing the volatility narrative for equity markets.

In early May, the Federal Reserve raised interest rates for the second time in 2022 to continue its daunting task of stopping the inflation snowball – without causing a recession. While the economy is still strong, recession rumors have investors worried about the future.

Staying the course and remaining invested could prove to be a wise decision during volatile times. Incorporating an appropriate process-oriented approach for managing investments and focusing on the long-term can typically prove to be one of the better ways to help buffer the effects of volatility. “It won’t be the economy that will do in investors; it will be the investors themselves. Uncertainty is actually the friend of the buyer of long-term values,” were the wise words of Warren Buffet. For knowledgeable investors, panic is not a plan. In fact, panic can lead to a costly mistake.

Please remember, market downturns are uncomfortable but not uncommon. Short-term investors are likely to feel the effects of recent market volatility more acutely than long-term investors. Historically, investors who stay in the market through volatile times come out significantly ahead of where they would have been should they pulled their money out. Short-term fluctuations typically right themselves and investments prove to be more fruitful than if they had been removed from equity markets in a downturn.

Drawdowns or market declines have been a part of history. Dating all the way back to 1972 (50 years), investors have experienced and survived market declines. Predicting the timing of the exact movement of equity markets is near impossible. While planning during a downturn can be a challenge, it is always prudent and recommended.

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— J. Michael Black, CFP®, is an investment advisor representative with SagePoint Financial, Inc. Securities and investment advisory services offered through SagePoint Financial, Inc. (SPF) member FINRA, SIPC. SPF is separately owned and other entities and/or marketing names, products or services referenced here are independent of SPF. JBA Financial Services, 2110 Horseshoe Lane, Longview, Texas 75605. (903) 295-0868. This article is for informational purposes only. This information is not intended to be a substitute for specific individualized tax, legal or investment planning advice as individual situations will vary. For specific advice about your situation, please consult with a lawyer, tax or financial professional. The information contained in this report does not purport to be a complete description of the securities, markets, or developments referred to in this material. The information has been obtained from sources considered to be reliable, but we do not guarantee that the foregoing material is accurate or complete. Any information is not a complete summary or statement of all available data necessary for making an investment decision and does not constitute a recommendation. Past performance is not a guarantee of future results.

Investing involves risk and investors may incur a profit or a loss. No investment strategy or risk management technique can guarantee return or eliminate risk in all market environments. All performance referenced is historical and is no guarantee of future results. All indices are unmanaged and may not be invested into directly. Sources Bloomberg.com; Fidelity.com; S&P 500; Capital Group, A Wealth of Common Sense 5/2022. Contents provided by the Academy of Preferred Financial Advisors, Inc.