It’s severe weather season in Wisconsin. Earlier this week, we had a major thunderstorm roll through in the late afternoon. The storm clouds encompassed the sky, blocked out all the light, caused quite a bit of worry, and left some damage in their wake (fortunately, most areas weren’t as hard hit as had been anticipated).

As I sat in my living room watching the storm out my large front window (and worrying!), it was a clear analogy to the storm encompassing markets as of late. Lots of darkness, worry, and damage. Just as I was letting my mind take this analogy perhaps a bit too far (occupational hazard!), the storm stopped just as suddenly as it had arrived. The rain faded, everything grew quiet, and the sun returned, adding a silvery hue around the remaining clouds. A gentle reminder that every cloud – even the current one impacting markets right now – truly does have a silver lining and there may be some benefits we are overlooking.

Don’t believe me? Here are a few – if you have any to add to the list, please let me know. I understand none of this changes the fact that we are still surrounded by storm clouds but it may just lessen the worry in the time until the sun returns

1.) Everyone loves a sale, right? – when our favorite retailer puts goods on sale, we are elated. We rush to buy the goods we’ve been eyeing and brag about our savings. However, when financial markets put things on sale (ie: prices fall), we tend to view it as a negative and we hesitate to purchase. Buying low and selling higher should remain the goal. Yes, there are headwinds facing markets and prices could go down from here. However, there are many very valuable and well-run companies and securities that are “on sale.” It may be time to do some shopping

2.) Rising rates are not all bad – The current storm impacting markets is the result of many factors – including rising interest rates. (Note: see article on recent Fed Funds Rate here). While rising rates are a challenge for markets, they also allow investors/savers (at some stage) to earn a higher rate of return on short term cash and cash equivalents. They days of 0.01% on money market funds are a thing of the past. Small consolation in a high inflationary environment – but still, it’s a positive

3.) Opportunity to harvest – If you have taxable investment accounts, you pay income tax on any activity in the account each year (interest, dividends, and net capital gains). If you have securities that are in a loss position at the moment, this can be discouraging and hard to see. However, realizing that loss may help reduce your income taxes due at the end of the year (or in the future as realized losses can be carried forward). You don’t have to earn your money back the same way you lost it. (Note: Tax loss harvesting is a bit technical and there are rules surrounding how long you have to stay out of the security you sell at a loss, so please work with your financial advisor and/or accountant before proceeding)

4.) Narrow focus, reduce worry – I understand the compulsion to worry about what is occurring in markets. No one enjoys seeing a meaningful amount of their portfolio value evaporate in a matter of months. However, I would argue this is an excellent time to shift your perspective to the near-term and away from some far off point in the future. Is your future financial situation and ability to live your life drastically different than it was a few months ago? I can’t speak for everyone, but if you are a Windermere client, we have worked (in advance of this storm), to ensure clients have an emergency/cash reserve account. We have designed a target allocation that allows for some portion of clients’ allocation to be less impacted by volatility. We have reviewed cash flow to ensure needs can be met without withdrawing from investments at these low levels. We have helped refinance debt and set-up home equity lines in the event of a liquidity need. Clients are focused on their jobs and lives – grounded in the present. When looking at this from that lens, odds are you are just fine too. You are not spending 100% of your savings right now – so try to focus on what remains, not what has changed or what you feel has been lost. Onward we go

5.) Dollar cost averaging – many investors save via employer plans (think 401ks and 403bs). These plans defer a portion of each paycheck into an investment account. Amounts moving into those accounts in recent weeks are taking advantage of lower entry price points. Other investors can do the same thing – shifting any excess cash/savings into the market (based on your target allocation) steadily over time

6.) Roth conversion opportunity – there are two main types of retirement accounts in the US – traditional (also known as pre-tax) and Roth. With traditional accounts, you receive a tax deduction upon contribution and will therefore pay income tax when the funds are withdrawn (on the balance which includes contributions and any activity/earnings over the life of the account). With Roth accounts, you do not receive a tax deduction upon contribution so you don’t pay any tax when the contributions are taken out (since you’ve already paid tax). BUT, the added bonus with Roth accounts is that you also don’t pay any tax on the earnings/activity in the account over its lifetime (ie: gains/interest/dividends). Roth accounts are a very powerful account type to have in your consolidated investment portfolio. If you don’t have a Roth, you can convert your traditional retirement account. Since this results in current year taxation of any converted balance (ie: the dollars converted to Roth become ordinary income in year of conversion), proceeding with a conversion when the market is down by such a meaningful amount can prove wise over the long run. Again, this is an involved transaction that has both investment and income tax implications so please consult your financial and tax advisor to review your specific situation

7.) This storm will pass – It may not seem like it now, but this storm will pass. They always have and they always will. When will it happen? How much more do investors need to endure? What will the sign be that marks the end? No one knows the answers to these questions. The commentators on the news may pretend to know – but no one does. All we can do is look at history and study markets and respect the fact that every time before this one, the storm has passed eventually.

Wishing us all more silver linings and sunny skies ahead,

Note: All commentary above is as of the date of this post and is for education and informational purposes only. Windermere and its principals do not intend for this to serve as investment advice and are not responsible for any actions taken based on this article. Consult your financial advisor before taking any actions as it relates to your own investment portfolio