The Wealth Playbook: Panic never saved anyone
- Constantine J Kitrinos, CPFA
- 3 days ago
- 8 min read
If you have turned on the financial news anytime in the last few weeks, you would be forgiven for feeling like your retirement portfolio is under siege. Unlike the movie, no chef with secret ninja skills or karate can save your portfolio, but it's not a complete doom and gloom situation. Between surging global conflicts, shifting interest rates, and the constant drumbeat of inflation, the macroeconomic headlines are shouting at us daily, and it's certainly hard to ignore. There's no doubt about that. Let's face it, there's always a reason to sell. I get questions about the start of World War III and what if it's coming? I beg to ask, what if it's not?
For investors—especially those nearing or in retirement who rely on their portfolios for income—these threats loom incredibly large. They don't have the time or leniency to sit tight and wait, or do they? When the headlines get scary, the temptation to abandon your strategy and "go to cash" is stronger than ever. But is that actually the safest move? Believe it or not, moves in and out of your strategy can cost you quite a bit, actually. Sure, you might save a percent or two early on, but when are you redeploying capital? Imagine going on a long trip and running into some construction, only to pull over, take back roads, then change course again and again anytime something troubling was in front of you? That could get messy real quick and cause you to get lost and never reach your destination!
In Season 8, Episode 119 of the Pennywise Financial Podcast, I sat down with David Georgiev, Partner at Monarch Wealth Management and author of the popular Defeating Goliath blog. Together, we cut through the emotional panic of the 24/7 news cycle and looked strictly at the hard data.
Whether you're a high-net-worth investor or Mr. and Mrs. Smith, living a middle-class lifestyle, building a bulletproof income floor when you retire is considered your ultimate "Wealth Playbook."
Here is a deep dive into the data-backed strategies we discussed on the show, and why operating out of wisdom—not fear—is the key to long-term financial success.
1. The Staggering Cost of Panic: Why Market Timing Fails
When global tensions rise, the most common behavioral mistake investors make is trying to "time" the market. The logic feels sound in the moment: Sell now, go to cash, and buy back in when things calm down. That all sounds fine and dandy, but it's definitely NOT what I've seen take place. The data tells a terrifying story about this strategy, and I've been a witness to it in the past. The market's absolute best days often occur within just a few weeks of its worst days. I believe that the cycle is getting shorter and shorter with the implementation of algorithmic trading and AI models instructed to take action when and if an index hits a trigger. If you are sitting in cash waiting for the dust to settle, you will inevitably miss the rebound.
The Data: According to J.P. Morgan Asset Management’s widely respected Guide to the Markets, an investor who stayed fully invested in the S&P 500 over a 20-year period (from 2004 to 2023) earned an annualized return of roughly 9.8%. I don't think there's an investor around that would be disappointed with a return close to 10% per year on average. However, if that same investor panicked and missed just the 10 best days in the market over two decades, their annualized return was nearly cut in half, plummeting to just 5.6%. Ouch, that is NOT what we should be aiming for.
The Playbook Move: Time in the market will almost always outperform timing the market. Stick to your tailored strategy and lean on your advisor to help guide you off the ledge, regardless of how tempting that may be.
2. Geopolitics & Your Portfolio: Historical Resilience
War and geopolitical unrest carry a heavy, tragic human cost. Naturally, watching these events unfold on television causes extreme anxiety about the future of the global economy. News stations do a great job of selling fear. That's not to say that there aren't things to be worried about, but it's more about what you should or shouldn't be doing about it. Keeping that in mind, how does the U.S. stock market actually respond to geopolitical shocks?
The Data: Historical research from LPL Financial tracking major geopolitical events—from the attack on Pearl Harbor to the Cuban Missile Crisis and the Iraq War—reveals a surprisingly resilient pattern. The U.S. and its economy are more resilient than you might imagine. On average, the S&P 500 experiences a total maximum drawdown of only about 5% following a major geopolitical shock. Now that number does sound a bit shallow, but we're looking at solely the impact of major events. In many cases, they can potentially cause a ripple effect that takes time to develop, and then other factors come into play. More importantly, the market typically fully recovers its losses within an average of just 47 days. Many times, it even goes unnoticed to the folks who rely solely on their quarterly statements. A very good example of that was the COVID era!
During our podcast conversation, David and I also highlighted the "hidden inflation tax" of global conflicts: Oil. When conflicts erupt in the Middle East or Eastern Europe, crude oil prices often spike, driving up the cost of manufacturing and transportation. I see it at the pump in my mid-sized sedan, so just imagine large freighters and bigger transport vehicles. For investors with assets invested in a diversified portfolio, hedging against this commodity-driven inflation with real assets or energy sector allocations is a critical defensive maneuver. This is something we can and will help clients navigate and understand.
3. The Fed’s New Yield Reality: Avoiding the "Cash Trap"
Over the last few years, investors have enjoyed a rare anomaly: generating 5% or more in risk-free, short-term Certificates of Deposit (CDs) and money market funds. We've been there, done that for our clients, but I'm sad to say those days are long gone. The Federal Reserve’s posture is shifting, and the days of high-yielding cash are normalizing, so going back to that well is delivering not much return.
The Data: Sitting heavily in cash carries two massive, silent risks: Reinvestment Risk and Inflation Risk. As the Fed stabilizes or cuts rates, those 5% CDs mature, and investors are forced to reinvest that cash at much lower rates (Reinvestment Risk). There are several people facing that right now. Simultaneously, long-term data from the U.S. Bureau of Labor Statistics proves that cash loses purchasing power to inflation 100% of the time over extended horizons.
The Playbook Move: If you need a reliable income, you cannot hide in cash forever. There are clients who have strategically allocated some funds in a cash reserve with a systematic plan of putting that money to work over time. It could be time to lock in some longer-duration, high-quality bonds or dividend-paying equities before the "cash trap" snaps shut. My clients are light on fixed income as a whole, so I'm not so sure we're heading down this path just yet.
4. The Income Antidote: Moving Beyond 60/40
For decades, the "60/40 portfolio" (60% stocks, 40% bonds) was the gold standard for retirees. But in today's shifting macroeconomic environment, traditional stocks and bonds are increasingly moving in tandem. The idea of diversifying into an asset class that could help hedge against market downturns in equities is not faring so well in this new market arena we're facing. When the stock market drops, bonds don't always provide the protective cushion they used to.
The Data: Institutional investors have known for years that the key to lowering volatility without sacrificing yield is the introduction of non-correlated assets. Sounds pretty fancy and sophisticated, but it's not so different once you understand the restrictive covenants, fee structure, risks, and how they work. Research from leading alternative asset managers like KKR and Blackstone shows that allocating 10% to 20% of a portfolio into private alternatives can significantly improve a portfolio's "Sharpe Ratio" (the measure of risk-adjusted returns).
The Playbook Move: High-net-worth investors ($1M–$5M+) are increasingly utilizing assets like private credit, structured income, and private real estate. Again, this may or may not be suitable for all investors. Some may not have the comfort, knowledge, or financial qualifications to even be eligible to utilize as a part of their investment portfolio. Because these assets are not traded on the public stock exchange, they don't always swing wildly based on a scary news headline. Now that's not always the case, as we've seen with respect to the Private Credit news as of late. They do tend or attempt to "zag" when the public markets "zig," providing a steady, promising income floor so retirees never have to sell off their core stock positions during a down market.
Stop Letting Headlines Dictate Your Future
The macroeconomic giants are loud right now, but they do not have the final say over your retirement. By ignoring the noise, understanding market history, avoiding the cash trap, and upgrading your portfolio with non-correlated assets, you can weather any storm. Reach out to your wealth advisor if you have one. If not, or you simply want a second opinion, contact one of our advisors to give you an analysis and strategic game plan for how to make the most out of this coming market cycle.
As Dave Georgiev beautifully points out in his latest writing, we are called to be wise stewards of our resources—operating out of diligence and peace, not panic.
📖 Read Dave’s latest blog post, "Staring down the Goliaths of the Global Market": Click Here to Read
🌐 Learn more about our philosophy at Monarch Wealth Management: www.monarchwealthmanagement.com
📞 Is your portfolio built to handle the Goliaths of the market? Schedule a consultation with Constantine to stress-test your strategy today.
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