Women's Money Wisdom

Episode 233: Olympic Lessons for Investors

• Melissa Joy, CFP® • Season 4 • Episode 233

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Summer is winding down, and there is a lot to unpack from the past few months. All the medals have been awarded and as we step off the podium and look towards fall we can’t forget some key takeaways.  

In the episode, Melissa Joy, CFP®, CDFA® reflects on the summer of 2024, discussing the stock market volatility and the lessons she learned from the Olympics. 

She emphasizes the importance of maintaining a positive outlook and not catastrophizing, drawing parallels between the Olympics and investing. 

 Melissa also highlights the need for diversification in portfolios and the celebration of access and women's participation in both sports and the economy. Listen in and share this episode. 

Key Takeaways: 

  • Reminder to diversify your investment portfolio to include different types of assets and investments. 
  • Celebrate access and women's participation in sports and the economy. 
  • Stay vigilant against fraud and conduct due diligence when making investment decisions. 
  • Be open to learning from real-life examples, such as the Olympics, and applying those lessons to investing. 

 

Resources: 


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Melissa Joy:

Welcome to the Women's Money Wisdom Podcast. I'm Melissa Joy, a certified financial planner and the founder of Pearl Planning. My goal is to help you streamline and organize your finances, navigate big money decisions with confidence and be strategic in order to grow your wealth. As a woman, you work hard for your money and I'm here to help you make the most of it. Now let's get into the show.

Melissa Joy:

We have had such an exciting summer. It has been one with a ton of news, a ton that was unexpected and some things that were planned that I really want to tie together in this episode. So I know many of you, in my conversations both with clients and friends, have been thinking about what the heck is going on with the stock market, and we've had our first kind of bout of volatility over the summer. So I want to touch on that. But I want to tie it in to one of my favorite things about the summer of 2024, which is the Olympics. I feel like and I know I'm a couple of weeks late because I was traveling and had some respite time during the Olympics and so I wasn't posting during but I really reflected on what I consider to be an extraordinary fortnight, both you know personally as well as collectively, for us here in America, and wanting to share with you some of the lessons that I take from Olympic moments and want you to be able to apply to investing markets, financial planning. I just felt like it was such a great opportunity. I couldn't wait two or four years for us to discuss, and I thought it was perfect timing given what is going on in the market. So let's start by talking about investments in the stock market.

Melissa Joy:

Obviously, we're talking in August 2024. And starting mid-July we started to have some volatility and bounces. We're still very near all-time highs as I record this mid-August, but we had a pullback, as measured by the S&P 500 and published by YCharts, of about 8.5% between July 16th and August 5th, and who knows where we go from there. It's been a little bit better over the past week or two, but that three-week period felt pretty disruptive Especially. I would just note for you, as you're thinking about how should I feel about markets. We'll let you know or remind you that it can often feel different when there's been a long period of lower volatility or things have been really good.

Melissa Joy:

And that's really the case for much of the last year and a half is that things looked pretty darn good, at least in aggregate, and there's some varying kind of details that are factoring into why we think markets may be lower, and I just wanted to touch on those for a moment. First of all, we've had inflation being high and that inflation is really persistent. It feels difficult, you feel it in your wallet and I do not want to minimize the very real costs of inflation. And the other really hard part to get used to when it comes to inflation is that when inflation goes down, that doesn't mean that you have prices going back to the level that they were before. In fact, it just means, typically, that inflation is going to end up going up less quickly than we had in the past. So that's something that you really got to get used to, and I would just mention that we don't want prices to start going down. That would tend to in aggregate. Of course, there may be some lower prices in the grocery store or vehicles or in the stock market. I'm just saying, if all the prices start to go down all at once, that's probably a signal of a very weak economy and other very negative things that are going on around the country, and so people keep waiting for prices to go down, and in fact we just got July numbers for inflation. The numbers came out at 2.9%, as recorded by the Wall Street Journal. That means that prices year over year are about 3% higher than they were last year, which is kind of a normal inflation number. Things tend to get more expensive over time, and so I just want to kind of level set expectations. But then the thing that has been fighting inflation, that has gotten these numbers back into a range that is slightly higher than the last 10 or 20 year average, but more certainly more in range, is that interest rates went way up, as controlled by the federal reserve in order to combat inflation.

Melissa Joy:

And whether you're someone looking to buy a house or borrow to do a home improvement or get a new car, or you're watching the stock market, um, lower interest rates would be beneficial for a variety of people not for everyone, cause if you're a bond investor, you might prefer, when you're the lender, to get paid a higher yield. But everyone has been that's a market watcher has been paying attention to when will interest rates start to go down. They've already paused, so we haven't seen a lot of at least Federal Reserve action to bolster rates. Um more recently and there was a meeting at the beginning of the month that was like hey, are we going to do anything about this? And the answer was not yet, maybe in september. And so there was some frustration with the not yet so inflation interest rates are certainly at play. And then, additionally, there's a separate interest rate story going on in Japan, where for many years there were actually negative real interest rates or extremely, extremely low interest rates, and the Japanese kind of market makers, the Japanese government, has been actually trying to increase interest rates, which basically resulted in money going from around the world back into Japan. So there was a little bit of a change going on in Japan.

Melissa Joy:

And then, of course, we also have a lot of what I would call headline volatility when it comes to presidential elections here in the United States. So we had an assassination attempt on former President Trump. We've had a change of candidate, with President Biden stepping down and replacing him on the ticket with Vice President Harris, an announcement of each of their vice presidential candidates who they'll be running with, and you know every four years, regardless of who's running, there's a lot of what's going to happen, what could go wrong. Everyone has an opinion and I always like to tell people that stock markets don't necessarily care who's president. It tends to be a decent year in the market, or actually a quite good year in the market in the year that elections happen. But a lot of those good returns tend to come closer to election time when there's more certainty about who will be running the country. But, like I said, we don't see trends that distinctly say if one party's in charge, then things will be good, if another party's in charge, things will be worse. What we do know is that in the past, democratic presidents have had better average performance over kind of the modern era since the 30s or 50s. But that can be more related to external events. For example, there were Republicans sitting presidents during 9-11, as well as early 2008 the stock market crisis there, as well as during COVID. So those are probably external events.

Melissa Joy:

The other thing that could be happening is A maybe we just don't know and B sometimes the market needs to take a pause. It's healthy to not just go up all the time. It's just not realistic to have no volatility and typically if you have everything good, everything priced to perfection and not some kind of fits and starts when it comes to the market, then that could be foreboding into bubbles or difficult situations. So I definitely would encourage you to consider that these drawdowns and drawbacks are certainly not the end of the world, but also are a function of a healthy economic and investment system. So, having allowed you know, given me the time to start to talk about what's going on in the market or in markets, I want to then tell you how I was thinking about markets, as I had a chance to reflect on the Olympics and if you have followed any of the blogs that I write, I'll include a link to our blog posts.

Melissa Joy:

But I do love to take, you know, kind of real life examples or mainstream, like entertainment examples and apply them to markets, cause I just think that's really healthy to not be overly focused on something that might make you nervous and take some kind of lessons and allegories from the real world, things we can share. And so I just couldn't help but talk about the Olympics, and it felt like having a podcast episode on this felt like the right thing. So some of the lessons I learned like I said, I love the Olympics, but I think I love them more and more each time, every four years, that comes around. Perhaps that's because of you know kind of I'm aging and getting older and it puts me in touch with you know, really positive vibes and I just feel like it's special. Perhaps I just have more time to kind of devote to taking it all in.

Melissa Joy:

But one of the things that I really felt, just a feeling and a vibe when it came to the Olympic experience as a viewer over the last couple weeks, was that overwhelmingly I feel positive, warm energy, good vibes when it comes to my experience watching the Olympics. I happened to speak with someone who was disappointed, as I know some people were, about the opening ceremonies and they felt that the political stance of the opening ceremonies did not fit with their world perspective and they'd chosen to opt out of the rest of the Olympics. And I really feel like my friend who was talking about this missed out, because there's so many extraordinary stories, stories of courage and hope and resilience and recovery and just the lessons of being so dedicated to something that people are so passionate about that I just want to remind people that it's okay to be positive and upbeat and certainly that would be something that you could take from these Olympics. When maybe you feel like all the headlines feel hopeless and out of control and I really try to enter my work in investments and building portfolios for clients and people like you I try to take that positivity and apply it to our investment process as well. Now, there's a reason for that. It's just not blind optimism that I hope things will work out.

Melissa Joy:

When you study investing in markets, especially US markets as measured by the S&P 500, you will find that typically seven years out of 10 markets go higher. And, yes, certainly there will be time periods that markets are negative. But it's very unpredictable as to when these periods will be and also as to how long they will happen. And so just in aggregate, day-to-day, it's about a coin toss as to whether markets will be up or down. So it's kind of like going to the casino in a slot machine. You just you know up or down, you have no idea. But over longer periods of time, performance becomes more predictable and over a decade it's about a 70% chance that any given year would be up, and I want to acknowledge that information as I start to formulate my investment kind of thesis and portfolio. And so, ironically, investing is also, in spite of all the reasons that markets should go down, typically, at least based on past history and I know past performance does not predict future returns a really darn positive experience.

Melissa Joy:

One of the quotes that I heard from the US Olympic basketball team from Kevin Durant actually and I'll paraphrase so as not to include that language, but he said a lot of BS happens in this country, but also a lot of great things happen too, and I really think that's true, whether it comes to your perspective on investing, but also your perspective of the Olympics in America, and so I always love to look for examples of where it's worth it to be positive, because I even need those reminders myself, and I know you do too when it comes to decisions about investing, and I really think the Olympics and investing shares that same positivity narrative. And, to put it even further, just as one of my other bullet point lessons was, do not be a do-it-yourself, don't assume that all the best days have already happened and that everything that's coming forward is really difficult. I just don't think that that is the right perspective, and the Olympic example that I'll use here is the team that is nearest and dearest to my heart. I grew up playing soccer and, in fact, played soccer mostly from age five until about a couple of years ago, so I've got four decades at least of soccer experience and I've always followed the US women's national team. I think they were an early forbearer of professional women's sports and really did so much work on equal pay and also, just you know, sports as entertainment led by females that we're seeing such extraordinary examples of whether it's on the track or in the pool or with basketball and certainly on the soccer field, and the US women had a really disappointing World Cup in 2023. It was disappointing to me personally, just having been a watcher of US women and really super fans were feeling very frustrated. They felt like there was a lack of direction with coaching and there were questions about the talent of the US national team and whether the structure that America has invested in would be supportive of future champions. Fast forward just a year to now and there is a new coach coaching the team who is noteworthy. Emma Hayes, who is coach of the US national team, has a lot of positivity, a lot of community, a lot of belief and a lot of support of her athletes, and they walked away with a gold medal after an extraordinarily disappointing World Cup and lowest rankings Just an exceptional representation and reminder that doomsdayers are often wrong and that I think of the quote that the reports of my demise have been greatly exaggerated.

Melissa Joy:

I just again. It's a reminder that when people invest in the future, that it doesn't pay off necessarily to be looking for the negative. I'm so glad that I could go into the tournament with an excitement and a spirit of opportunity as I was watching the tournament, so that I wasn't critiquing the team. Instead, I was amazed and excited about performances and I really think that the less is there. Just a reminder when things look grim, do not catastrophize, do not assume what has happened recently, because of course there will be setbacks, whether they're in your portfolio or in the field of life, but do think with some perspective, realizing that the end of the world is likely not near. Another note is just about American dominance.

Melissa Joy:

The US had a lot to celebrate in the Olympics 126 medals, which was far superior to 91 medals from China, a tie with China for the most golds at 40. And not only were there reasons to be optimistic, but there is also collaboration and shared joy. Nobody asked who your party was or what you think about things. When you think about what's happening in the country and I think, as investors, there is often so much critique, so much that one considers to be wrong in our country, oh, debt is here, employment's not as good as your courts say there, and I think it's a reminder that we have a lot more in common than you would think.

Melissa Joy:

Olympians come from all over the country, all walks of life, all kinds of sports, and there's opportunity to kind of collaborate, have community and share, and there's a lot of great things going on when it comes to results in the Olympics, as well as in investing, where the United States has just been a very strong place to be, in spite of you know a laundry list of reasons why America could be better. There's just been great results, especially when it comes to larger company stocks compared with investments around the world. One of the things that I think is a great kind of symbolism or comparison to investing is the need for diversification, both for your enjoyment but also to realize that you know, not everything that you're focusing on is the whole story. And so with the Olympics, we had so many examples of terrific stories, terrific sportsmanship or sports people, and they didn't always come from the typical nooks and crannies that we focus on, or they came from the nooks and crannies instead of the typical things we focus on. So of course, there's the main features the swimming pool in the first week of the competition and the track in the second week, the major team sports with volleyball and basketball and, as I mentioned, soccer.

Melissa Joy:

But there's so many sports going on. I mean, I remember people mentioning this week. Did you notice how far the archers have to send their arrows? Or there were the social media worthy memes about the Turkish shooter who comes out with no equipment at all and just is an excellent marksman. Or the stories in gymnastics about countries that didn't have the same resources as the United States. All of this it shows us that there is narrow-knit stories in the Olympics. But also there are investments and components of our portfolios that we build that don't look like everything else. And while we do often own more, for example, core bonds from the United States or large and small company stocks from the US, we also own things from around the world that look different and own some, you know, kind of differently correlated investments.

Melissa Joy:

And the satisfaction and joy of the Olympics is not just the marquee sports, it's not just those gold medal nights for the USA women's gymnastics team. There's also the celebration for those stories that may not be as in the limelight, and that's how we build portfolios too. So making the case for diversification, whether it's in your investment portfolio or one of my new favorite sports based on the Olympic experience the women's sevens rugby, where I thought Alona Mar and her team had such an amazing comeback for their bronze medal and, again, if I hadn't seen that, my Olympic experience as a viewer would not have been as special. Also, I think that there is a celebration of the opportunity for access. There was a great story from the women's marathon where the last place finisher who was a competitor from Bhutan her name was Kinzon Lamo. She finished more than an hour after the next to last competitor and was part of an access program that was created so that competitors could come and represent countries that might not otherwise have representation at the Olympics. But that standing ovation represented an extraordinary story of sportsmanship and access, and I think it's a reminder that we've had more and more access to investment markets as well, and people of all walks in life and are earlier in life can be investors nowadays, and so I love that the Olympics is expanding access, and certainly I'm recording this as the Paralympics are being played. But that's another excellent story of both athletics and access, and we also need to continue to expand access when it comes to investing in markets.

Melissa Joy:

And then another just kind of asterisk to the Olympics is the possible fraud that occurred with the Australian break dancer Regan, where there may have been some inside kind of association between the judging committee and her access to the Olympics, as well as just not performance as Bill. When it came to someone like that, and certainly sometimes things can be too good to be true and you need to be leery as an investor when it comes to your due diligence and making decisions about investments. That's one of the roles that we play as investment advisor. So keep your guard up for fraud, because I think you know part of the reason that there may not be brick dancing in future Olympics is because of that challenge.

Melissa Joy:

And then, finally, it wouldn't be the Women's Money Wisdom Podcast if I didn't mention that women represented 55% of medals from medals awarded at the Olympics for the US, and the female participation in the Olympics both increased in joy and the experience, but also the results, and I really feel like women's participation in our economy, women's participation in investment decisions when it comes to families and individuals, and women becoming a bigger part of our money stories and certainly you as listeners, whether you're a woman or a person who supports women I really think that that is a huge part of our future and our story, and so, with that, I just want to thank you for listening.

Melissa Joy:

Story, and so, with that, I just want to thank you for listening. We've had a terrific summer ourselves here at the Women's Money Wisdom Podcast, with all-time high numbers over the summer for listeners, and we hope that you're enjoying the information that we're bringing to the table. I'm going to try to include some more of these episodes where I'm either explaining perspective on markets or talking a little bit more, and so if you have episode ideas, please don't hesitate to reach out to me and have a great, great week. Thanks so much.

Melissa Joy:

Thank you for listening to the Women's Money Wisdom Podcast. If you found value in this episode, the best way you can support the podcast is to forward an episode to a friend or leave a review. Go to pearlplancom and the podcast link to get all the resources and links mentioned.

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