Tag Archive for: market timing

Oil, Conflict, and Your Portfolio: What We’re Watching

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Before we dive into the facts, we want to take a moment to recognize that before we are advisors or investment analysts, we are human. Our hearts go out to the families and individuals affected. We hold that reality close as we do our job of helping you navigate what it means for your financial future.

Part of that job is cutting through the noise, so let’s talk about what’s happening, what it means, and what we’re doing about it.

What’s Happening

The conflict entered its second week with crude oil briefly crossing $110 per barrel. Energy infrastructure in the region sustained damage, and the world turned its attention to the Strait of Hormuz — the narrow waterway through which roughly 20% of global oil supply flows — and whether it would remain open for business.

The View from fire-detecting satellites:
Fire anomalies detected by infrared sensors on 7-8 March. Circles are sized by fire radiative power, darker circles mean several fires in close proximity

Sources: FT Analysis, Nasa Firms. Fires reported are either in locations with no history of regular burns or are unusually bright.

We don’t have a crystal ball for what will happen next, but there are three questions we’re watching closely:

  1. Will there be more lasting damage to energy infrastructure?
  2. What does the endgame look like in terms of leadership and capabilities on both sides?
  3. Can a compromise be reached that keeps oil flowing through the gulf?

And Then Oil Dropped $20

Here’s the thing about geopolitical risk: it tends to be loud and unpredictable.

As I’m writing this, oil has pulled back from $110+ per barrel to below $90 — after President Donald Trump suggested the potential for a swift conclusion to the conflict. Meanwhile, the Strait of Hormuz is seeing vessel traffic increase, recovering from post-attack lows with inbound and outbound ship movements gradually rising. 

While it’s too soon to declare a resolution, the swift oil price drop following comments from President Trump shows the market was pricing in a major supply shock that hasn’t materialized. This underscores why we avoid trading headlines, which often lead to emotional decisions mistaken for analysis. Our consistent advice for geopolitical headlines remains: stay diversified, stay disciplined, and trust your portfolio strategy.

History Has Seen This Before

Here’s something worth sitting with. Looking at the past 20 major military conflicts and their impact on the S&P 500 over the last 75 years, the average decline from the initial shock to the market bottom was around 6%, and in 19 out of 20 cases, markets returned to pre-event levels in an average of just 28 days.

The two biggest exceptions — the 1973 Yom Kippur War and Iraq’s 1990 invasion of Kuwait — both involved sustained oil supply disruptions that pushed stocks down 15–16%. The 1973 episode scarred a generation of investors who sold out of equities and missed the enormous bull run of the 1980s.

The lesson isn’t that conflicts don’t matter. It’s that panicking out of a well-structured portfolio tends to hurt more than the conflict itself does.

This Isn’t 1973

Clients who lived through the Yom Kippur War might flinch from the prospect of re-living around-the-block gas lines, federally imposed speed reductions, or darkened cities to conserve energy. We understand the instinct, but there are major differences today.

In 1973, the U.S. was heavily dependent on imported oil. Every extra dollar at the pump was more money in the pockets of Middle Eastern countries. Today, the U.S. is a net energy exporter. Higher oil prices are painful for consumers, yes — but every extra dollar is more cash in the pockets of domestic energy producers. It’s a redistribution within the economy, not a pure drain out of it.

As for inflation, Energy makes up only about 6% of today’s U.S. inflation basket.  There also headwinds blowing against the case for a 1970’s stagflation landscape, including:

  1. Shelter Lags: Shelter costs (33% of the basket) are declining as lagging rent data catches up to reality, which will apply downward pressure on inflation prints.
  2. Technological Progress: AI and technology-driven productivity is quietly acting as a deflationary force as consumers and businesses increase adoption.
  3. Calming Tariff Tantrums: After the recent IEEPA tariff ruling, the effective tariff rate has also come down meaningfully to 9.1%.
  4. Fundamental economic strength: We acknowledge the recent jobs report’s weakness, but also recognize other areas in the economy remain healthy. Corporate profits are expected to grow at high single to double digits in 2026. Tax refunds from last year’s One Big Beautiful Bill (OBBB) haven’t fully hit consumer accounts yet.

The Fed will likely pause at upcoming meetings, but that’s very different from the kind of policy circumstances that defined the stagflation era.

Weeks, Not Months?

Both sides have strong incentives to reach a compromise quickly. Iran can’t export oil under prolonged conditions and is subject to existential economic pressure. In the U.S., $4+ gas heading into a midterm summer is its own political tax. December oil futures were already trading in the low $70s before today’s pullback, suggesting the market never fully bought the doomsday scenario. Inflation breakeven rates have stayed surprisingly calm throughout.

Even after hostilities quiet down, there’s likely a period of elevated shipping costs and more cautious tanker behavior through the region. Think of it as a persistent risk premium rather than a single clean resolution — but a manageable one, not an economy-altering one.

What We’re Doing

We’re not making dramatic moves based on headlines and that’s by design. We are however, sticking to our operating procedure of:

  1. Rebalancing – different parts of our clients’ portfolios have generally weathered the volatility well, but some may have drifted off target. Rebalancing is a disciplined move back toward those levels, not a market call, but a long-term wealth strategy of selling strength and buying weakness.
  2. We built the “Diversifiers” strategy in client’s retirement portfolios for moments like this. It’s doing its job and reminding us that traditional stock-bond portfolios don’t always move in opposite directions when inflation is in the picture.
  3. If markets sell off further in an extreme scenario, we have the flexibility to tilt asset classes within our portfolios.

We’ll continue monitoring the conflict while staying with our standard operating procedure, but what we won’t do is trade headlines. The oil price chart of the last two weeks makes that case better than we ever could.

WSWA

Warren Street Wealth Advisors

Warren Street Wealth Advisors, LLC., a Registered Investment Advisor

The information presented here represents opinions and is not meant as personal or actionable advice to any individual, corporation, or other entity. Any investments discussed carry unique risks and should be carefully considered and reviewed by you and your financial professional. Nothing in this document is a solicitation to buy or sell any securities, or an attempt to furnish personal investment advice. Warren Street Wealth Advisors may own securities referenced in this document. Due to the static nature of content, securities held may change over time and current trades may be contrary to outdated publications. Form ADV available upon request 714-876-6200.

Sources:

Beyond the Market: Understanding Your Investment Performance

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Sometimes, it pays to strive for greener grass. But as an investor, second-guessing a stable strategy can leave you in the weeds. Trading in reaction to excitement or fear tricks you into buying high (chasing popular trends) and selling low (fleeing misfortunes), while potentially incurring unnecessary taxes and transaction costs along the way. 

Still, what do you do if you’re unsure about how your investments stack up?

Compared to the Stocks du Jour?

It’s easy to be dazzled by popular individual stocks or sectors that have been earning more than you have and wonder whether you should get in on the action. 

You might get lucky and buy in ahead of the peaks, ride the surges while they last, and manage to jump out before the fads fade. Unfortunately, even experts cannot foresee the countless coincidences that can squash a high-flying holding or send a different one soaring. To succeed at this gambit, you must correctly—and repeatedly—decide when to get in, and when to get out … in markets where unpredictable hot hands can run anywhere from days to years. 

Remember, too, just by investing your money in the global stock market overall and sitting tight, you’ll probably already own some of today’s hot holdings. You’ll also automatically hold some of the next big winners, before they surge (effectively buying low).  

Rather than comparing your investments to the latest sprinters, be the tortoise, not the hare. Get in, stay in, and focus on your own finish line. It’s the only one that matters.

Compared to “The Market”?

What if your investments seem to be performing differently not just from the high-flyers, but from the entire market? Maybe you’re seeing reports of “the market” returning a different amount than what you are experiencing. 

Remember, when a reporter, analyst, or other experts discusses market performance, they’re usually citing returns from the S&P 500 Index, the DJIA, or a similar proxy. These popular benchmarks often represent one asset class: U.S. large-cap stocks. As such, it’s highly unlikely your own portfolio will always be performing anything like this single source of expected returns. 

Most investors instead prefer to balance their potential risks and rewards. For example, if your portfolio is a 50/50 mix of stocks and bonds, you should expect it to underperform an all-stock portfolio over time. But it also should deliver more dependable (if still not guaranteed) returns in the end, along with a relatively smoother ride along the way. 

Even if you’re more heavily invested in stocks than bonds, a well-diversified stock portfolio will typically include multiple sources of risks and returns, such as U.S., international, and emerging market stocks; small- and large-cap stocks; value and growth stocks; and other underrepresented sources of expected return. 

Thus, we advise against comparing your portfolio’s performance to “the market.” Usually, any variance simply means your well-structured, globally diversified portfolio is working as planned. 

In Summary

Admittedly, it can be easier said than done to avoid inappropriate performance comparisons across shifting times and unfolding events. But your portfolio should be structured to reflect your financial goals and your ability to tolerate the risks involved in pursuing your desired level of long-term growth. 

In roaring bull and scary bear markets alike, we team up with you to address these critical questions about your investments. That way, you can accurately assess where you stand and where you’d like to go from here. 

Please reach out to your advisor if you’d like to discuss further. We are always here for you!

WSWA

Warren Street Wealth Advisors

Warren Street Wealth Advisors, LLC., a Registered Investment Advisor

The information presented here represents opinions and is not meant as personal or actionable advice to any individual, corporation, or other entity. Any investments discussed carry unique risks and should be carefully considered and reviewed by you and your financial professional. Nothing in this document is a solicitation to buy or sell any securities, or an attempt to furnish personal investment advice. Warren Street Wealth Advisors may own securities referenced in this document. Due to the static nature of content, securities held may change over time and current trades may be contrary to outdated publications. Form ADV available upon request 714-876-6200.

Eight “Best/Worst” Wealth Strategies During the Coronavirus

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“The utility of living consists not in the length of days, but in the use of time.”

-Michel de Montaigne

For better or worse, many of us have had more time than usual to engage in new or different pursuits in 2020. Even if you’re as busy as ever, you may well be revisiting routines you have long taken for granted. Let’s cover eight of the most and least effective ways to spend your time shoring up your financial well-being in the time of the coronavirus. 

1. A Best Practice: Stay the Course 

Your best investment habits remain the same ones we’ve been advising all along. We build a low-cost, globally diversified investment portfolio with the money you’ve got earmarked for future spending. We structure it to represent your best shot at achieving your financial goals by maintaining an appropriate balance between risks and expected returns. We stick with it, in good times and bad.

2. A Top Time-Waster: Market-Timing and Stock-Picking

Why have stock markets been ratcheting upward during socioeconomic turmoil? Market theory provides several rational explanations. Mostly, market prices continuously reset according to “What’s next?” expectations, while the economy is all about “What’s now?” realities. If you’re trying to keep up with the market’s manic moves … stop. It is not a good use of your time.

3. A Best Practice: Revisit Your Rainy-Day Fund

How is your rainy-day fund doing? Right now, you may be realizing how helpful it’s been to have one, and/or how unnerving it is to not have enough. Use this top-of-mind time to establish a disciplined process for replenishing or adding to your rainy-day fund. Set up an “auto-payment” to yourself, such as a monthly direct deposit from your paycheck into your cash reserves. 

4. A Top Time-Waster: Stretching for Yield 

Instead of focusing on establishing adequate cash reserves, some investors try to shift their “safety net” positions to holdings that promise higher yields for similar levels of risk. Unfortunately, this strategy ignores the overwhelming evidence that risk and expected return are closely related. Stretching for extra yield out of your stable holdings inevitably renders them riskier than intended for their role. As personal finance columnist Jason Zweig observes in a recent exposé about one such yield-stretching fund, “Whenever you hear an investment pitch that talks up returns and downplays risks, just say no.”

5. A Best Practice: Evidence-Based Portfolio Management

When it comes to investing, we suggest reserving your energy for harnessing the evidence-based strategies most likely to deliver the returns you seek, while minimizing the risks involved. This is why we create a mix of stock and bond asset classes that makes sense for you; we periodically rebalance your prescribed mix (or “asset allocation”) to keep it on target; and/or we adjust your allocations as your goals change. We also ensure that we structure your portfolio for tax efficiency, and choose the ideal holdings for achieving all of the above. 

6. A Top Time-Waster: Playing the Market 

Some individuals have instead been pursuing “get rich quick” schemes with active bets and speculative ventures. The Wall Street Journal has reported on young, do-it-yourself investors exhibiting increased interest in opportunistic day-trading, and alternatives such as stock options and volatility markets. Evidence suggests you’re better off patiently participating in efficient markets as described above, rather than trying to “beat” them through risky, concentrated bets. Over time, playing the market is expected to be a losing strategy for the core of your wealth. 

7. A Best Practice: Plenty of Personalized Financial Planning

There is never a bad time to tend to your personal wealth, but it can be especially important – and comforting – when life has thrown you for a loop. Focus on strengthening your own financial well-being rather than fixating on the greater uncontrollable world around us. To name a few possibilities, we’ve continued to proactively assist clients this year with their portfolio management, retirement planning, tax-planning, stock options, business successions, estate plans and beneficiary designations, insurance coverage, college savings plans, and more. 

8. A Top Time-Waster: Fleeing the Market

On the flip side of younger investors “playing” the market, retirees may be tempted to abandon it altogether. This move carries its own risks. If you’ve planned to augment your retirement income with inflation-busting market returns, the best way to expect to earn them is to stick to your plan. What about getting out until the coast seems clear? Unfortunately, many of the market’s best returns come when we’re least expecting them. This year’s strong rallies amidst gloomy economic news illustrates the point well. Plus, selling stock positions early in retirement adds an extra sequence risk drag on your future expected returns. 

Could you use even more insights on how to effectively invest any extra time you may have these days? Please reach out to us any time. We’d be delighted to suggest additional best financial practices tailored to your particular circumstances. 

—

Justin D. Rucci, CFP®

Wealth Advisor, Warren Street Wealth Advisors

Investment Advisor Representative, Warren Street Wealth Advisors, LLC., a Registered Investment Advisor

The information presented here represents opinions and is not meant as personal or actionable advice to any individual, corporation, or other entity. Any investments discussed carry unique risks and should be carefully considered and reviewed by you and your financial professional. Nothing in this document is a solicitation to buy or sell any securities, or an attempt to furnish personal investment advice. Warren Street Wealth Advisors may own securities referenced in this document. Due to the static nature of content, securities held may change over time and current trades may be contrary to outdated publications. Form ADV available upon request 714-876-6200.