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Everybody Loves a Sale!!

Everybody Loves a Sale!!

March 20, 2024

As a young child growing up, I learned that buying things on sale was important. You see, I was the oldest of three children. Our family of five was supported by my dad‘s income as a navy-trained electrician. While we were not technically poor,  I can remember that being able to go to K-Mart or Sears and get a pair of jeans or a couple of T-shirts for the start of a new school year was a big deal.

My next lesson on the importance of sales came when I turned age eleven. This was when I began working as an afterschool newspaper delivery boy for the Akron Beacon Journal. Whenever there was a major sale, it produced a significant number of sales flyers, which, in turn, made the newspapers I carried much heavier. It seemed like there were sales going on all the time, judging by the weight of the Sunday newspaper.

Source: Ideastream Public Media

My next lesson in the importance of sales came during my first two years of college, which I paid for in large part by loading and unloading trucks for O’Neil’s, a.k.a., Macy’s Department stores. Any and every occasion was viewed as a reason to have a sale. After Thanksgiving, pre-Christmas, after Christmas, Presidents’ Day, Easter, Memorial Day, etc., etc. And, O’Neil’s figured out that if there was no reason to have a sale, they would have one anyway and call it the One-Day Sale. They typically had several one-day sales each month. Below is an announcement of the opening of the Stow-Kent Store in 1965, the year I was born. This was the store I worked at, which was torn down last year.

Source: Akron Beacon Journal

Why the focus on sales? Great question, let’s explore this together. It seems that Americans value being able to buy things at a discount. There are few things that make people happier than being able to feel like they got a deal on something they needed (or wanted).

This seems to extend to all areas of life except for when people are buying their financial assets. I have now worked as a financial advisor for more than 35 years. Unfortunately, financial assets go on sale on a somewhat regular basis, and their prices drop. This allows people to buy more of something they previously wanted at a lower price. Instead, people tend to panic, which does not help if your goal is accumulating wealth.

As a matter of fact, people looking to accumulate the resources they will need to retire comfortably or educate their children and grandchildren, often tend to buy things when prices are high. I could give you multiple examples, but I will limit today’s discussion to just a couple of obvious ones that I have seen over the last three decades.

In the late 90s, anything attached to the Internet or dot.com theme saw its price rise aggressively. It did not matter whether they had great business models or even if they had sales and/or profits. This speculation seemed to hit a peak around the time of the Super Bowl in 2000 when many of the companies featured in the ads ceased to exist in the next few years.

We watched a similar phenomenon take place just a few years later as the real estate bubble enticed people to continue to buy real estate, even after prices had risen dramatically. It seemed too good to be true, which is always a warning sign, but on a historical basis, real estate prices never went down nationally. Even then Federal Reserve Chairman Ben Bernanke said so in a CNBC interview with anchor Maria Bartiromo. All of this worked great until it didn’t.

It has been said that the New York Stock Exchange is the only place on earth where when they have a huge sale, everyone runs screaming out of the store. 

Warren Buffett, one of the most successful but least emulated investors of the last 70 years, once used this analogy when explaining sales in stock market prices. “If you owned a bakery, and the price of flour went on sale for 20% off, you would back up the truck and buy all you could while prices were down.” This is logical behavior that people would utilize to accrue almost any asset.

Investors often think of the S&P 500 as just an index, when in reality, it is a composite of 500 of the largest, most profitable, and most innovative companies headquartered in the United States. The leaders of these companies are charged with generating sales and profits, regardless of the economic backdrop, and without regard to whoever is in the White House, or on Capitol Hill.

It is quite likely that at some point this year, as in most years, we will see stocks, which are currently trading at new all-time highs, go on sale again. As you can see from the chart below from our friends at JP Morgan Asset Management, since 1980, the stock market has averaged a 14% intra-year downturn on an annual basis. 

Each time this happens, the financial media begins to scream that the end of the financial world is coming… once again. And there will be a few of our clients who listen to these market commentators and prognosticators and will call us panicked. You know who you are. Just to complete the point, let me remind you that if you had bought in October ‘22 when the market was down 26%, ON SALE, you would have made a wise investing decision.

So, the next time this happens, let’s treat it like somebody put an ad in the Sunday newspaper, announcing that stocks have gone on sale. Let’s rush to buy, instead of panic or sell. Please remember that if we do what most people do, we will get the results that most people get. Since most people are not wealthy, we do not want to follow their path or actions.

The diversified portfolio that has been designed by the CFPs at Impel Wealth Management has been put together to help you reach your financial goals. Unless those financial goals have changed, your portfolio most likely should not either.

We wanted to bring you this reminder and give you something to think about the next time the financial markets go on sale. If you have questions or concerns about your unique situation, please remember that we are here to help you take advantage of these sales that occur on a regular basis as we continue “Moving Life Forward.”

© 2024 Jesse Hurst

The views stated are not necessarily the opinion of Cetera and should not be construed directly or indirectly as an offer to buy or sell any securities mentioned herein. Due to volatility within the markets mentioned, opinions are subject to change without notice. Information is based on sources believed to be reliable; however, their accuracy or completeness cannot be guaranteed. Past performance does not guarantee future results.

Investors cannot directly invest in indices.

Investments in securities do not offer a fix rate of return. Principal, yield and/or share price will fluctuate with changes in the market conditions, and, when sold or redeemed, you may receive more or less than originally invested. No system or financial planning strategy can guarantee future results. 

Featured blog image source: iStock.com/finevector