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Market Update | May 23, 2022

My wife and I are about to take our first transatlantic flight since 2019. It’s exciting! We look forward to being in Europe again – fresh pastries, a warm Mediterranean breeze, and fascinating historic sites.

Well, I should clarify: we’re excited about the destination but not the flight. This is how most of us feel about investing. We’re excited about investing’s long-term benefits to our financial plan (the destination) but not thrilled about the unglamorous, uncomfortable method to get there (the flight).

Almost half of this year’s trading days have suffered intra-day swings of more than 2% on the S&P 500 index, and most of them have experienced at least 1% moves. The S&P 500 has declined 17.7% year-to-date through Friday. This is like a flight with uncomfortable – although not catastrophic – turbulence. (Periods of true market stress historically exhibit twice or more of the volatility we’ve seen this year.)

When might the volatility end? Jeff Mortimer, Director of Investment Strategy at BNY Mellon, says, “It will take clear signs that inflation, now at 40-year highs, is declining, or has at least peaked. That, unfortunately, could be some months away, and [investors] should prepare for further market gyrations as we move into the summer.”

We sympathize that investing is uncomfortable in this environment. The air is choppy, and it may remain choppy longer. However, provided that your risk tolerance and time horizon are aligned with your portfolio, we encourage you to stay on board the airplane because we believe the destination will be worth it.

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