We are already halfway through yet another eventful year, and wanted to take this opportunity to  reflect on what’s happened and how we’d like to approach the second half of 2022, especially as it relates to your financial planning.It means we can revisit our core beliefs, enabling us to act and feel calm during these times of extreme uncertainty.We don’t have a crystal ball, but we do have history as our guide, which means we can provide an informed view of how best to process current and future events.What’s happenedThe first half of 2022 has been pretty interesting for financial markets and one of the worst 6-month periods we’ve ever seen for stocks and bonds, plus we have seen:1.    Record inflation numbers in most countries around the world2.    An ongoing conflict between Russia and Ukraine that has major regional and global consequences3.    Central banks starting a cycle of raising short-term interest rates, and4.    Widespread concerns about an impending global recessionGiven this environment, it’s not surprising that global stock markets have declined for the last six months. We now find ourselves in a second “bear market” in three years (a decline of more than 20% from the previous high for US equities). These conditions typically only come around every three to five years.Here on our own shores and at the time of writing, Boris Johnson has just resigned as leader of the Conservative party. He will remain as Prime Minister until a new party leader is confirmed. That new leader will need to navigate us through one of the most challenging economic periods we have seen for a number of years. The immediate reaction to the news was the pound jumped 0.5% against the dollar, from $1.193 to $1.199 as currency dealers reacted positively and so far, the markets have given a ‘muted’ response to the news.A positive longer-term point is a potential change in policy from the Bank of England. Political uncertainty (with a small chance of a general election) is something the central bank will take into account when making future policy decisions. It may decide to trim down future interest rate hikes later this year until there is more political stability.As the FTSE 100 reacts negatively to higher interest rates, this could be supportive of the market going forward.A word on Crypto As bad as the period was for stock and bond investors, it was much worse in the cryptocurrency market. The price of Bitcoin, the first cryptocurrency and the largest by market size, fell 56.5% in Q2.After starting the quarter at $46,282, Bitcoin prices dipped below $20,000 on June 18 for the first time since December 2020, ending the quarter at $19,784.73.Though cryptocurrencies have been highly volatile for their entire history, losses of this size have never been seen for any quarter since the first Bitcoin began trading in 2014. The price of Ethereum, the second-largest cryptocurrency by market cap, tumbled 67.5%.6 months is a short period of time in the grand scheme of thingsIf 6 months is going to make or break your investment plan, it wasn’t a very robust plan to begin with, your plan and portfolio need to be ready for a recession, which is always coming.While all these issues may be causing you concern, we believe that the core beliefs we hold about the economy and the stock markets remain sound.At the heart of this is the understanding (and acceptance) that the economy cannot be forecast. We also believe that stock markets cannot be timed. Do not believe anybody who says otherwise. We may yet soon find ourselves experiencing a recession (temporary economic decline). If this does happen while inflation is still raging it will give global policymakers very few levers to pull without the risk of making things worse in the short term.How long it will take for global markets to reach the previous highs is impossible to predict.Lots of people think bull markets are how you get rich, but true wealth is built during bear markets, and if you’ve been invested for the past 5-10 years or more the gains you’ve made (assuming you stayed invested) have more than made up for the current losses.That said, this doesn’t mean the losses don’t hurt, but don’t forget, you cannot earn decent long-term returns without experiencing periods of painful losses from time to time.Our adviceWe’ve been through times like these before, and we don’t know when this period will be behind us, but we do know the day will come when the future looks bright again.We believe that good investment behaviour, discipline and patience, is critical during these periods, stay calm and trust your plan (and portfolios) we’ve implemented. Whilst it’s simple advice, we know it’s not always easy to follow. We always recommend that you focus on the things that are within your control, namely how much you spend and how much you save. If you are making regular contributions to your investments, you are being rewarded. You are buying investments at a discounted price. These opportunities do not come around very often. Try to remain positive and keep your eyes on the road aheadMarket corrections can be good for the financial system. Lower asset prices provide better value for money for any new investments, and any concerns there may have been about the market being over-valued have now evaporated.Don’t be tempted to play short-term games. The media, gamblers and traders are all consumed by short-term games, which come with high levels of anxiety and low levels of reward. Instead, stick to your long-term plan with long-term people. Stay focussed on why you are investing, your investment timeframe and profits you have made to date. Stick with your plan, now more than ever. Finally, our message is remain calm, keep your eyes on the road ahead, and allow your Magus Wealth Planner to help you navigate through.If you’ve got something on your mind, or you would like to discuss any aspect of your finances, please do get in touch with us. Take care
Michael AitkenFounder and Chairman Magus Wealth
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