This Could Get Ugly - Some Thoughts
First, let me say this - I am a long term optimist. I firmly believe that humans evolved because we are collaborative, and come what may, I believe the better angels of our nature will prevail and things will be better in the future. My personal investments are in 100% stocks (apart from cash on the sidelines for emergencies, travel, and short term expenses), and so I am invested as an optimist. I also continue to buy every single paycheck and will continue to do so until I retire. I just want to share some thoughts about what I see could be a rough slog economically, financially (market wise), and elsewhere.
Next, if I am wrong and things are good for the next several years, we'll all be fine. However, there's no playbook needed to ride out good times, you just simply keep doing what you're doing, because things are good. The only risk during good times is that you go up 20% when the Nasdaq goes up 40% or that your bonus is 100% of comp instead of your buddy at XYZ firm who got 125%, but that's a survivable risk!
Now, the issues we face as Americans and elsewhere in the developed world are innumerable, but I think at the same time they are navigable. Let's dive in.
How could this get ugly? employment, inflation, recessions, liquidity crunch, stock market crash, lower prosperity than other generations. we could very well experience stagflation 2.0 with negative real returns in markets, rising inflation, collapsing housing prices, and if rates rise too much and growth slows too much, a default cycle that takes out many companies (banks included) to the woodshed. if that wasn't enough, we could also be about to enter world war 3 (remember how people thought hitler would stop with the sudetenland?), and I haven't even begun to mention washington and our self imposed debtor's prison that could turn the zoomer generation and millenials into the same types of people that endured the great depression.
Sound fun? Let's party!
employment - when I got my first job in finance post-college, unemployment was 10%. if you're job hunting in that environment, take what you can get. keep the network fresh. while there are a lot of job openings, as growth slows down and wage costs rise, companies may decide to pull some of those listings and do what everybody fears, layoffs. just like you fish and put lines in the water when you're not hungry, or don't dig your well when you're thirsty, the time to network is not after you get laid off, it's NOW. this is another reason why it's important to never burn a bridge. also, while things are still good, think about filling holes in your resume. is there a skill, subject matter, or certification that would make you more marketable if you were to get laid off? work on that NOW.
inflation - we have no control over inflation, however we do have control over how we spend our money. got that swanky 1 bedroom because your offer was good? how does that same apartment feel when they raise rents 10% and your income goes down by 25%? if you can stomach that, then you're in GREAT shape, if you cannot, consider moving, consider roommates, and so on. take a good hard look at your expenses, consider what you would have to eliminate if your comp dropped by 25%, 40%, or more, because if you work in finance long enough, that will happen from time to time. things like eating out all the time, shopping, buying rounds for people, those are easily removable, it's a lot harder to pull in expenses like a mortgage you overextended on, car payments, memberships, etc., you want the vast majority of your expenses to be variable so you can pull them back easily during times of crisis. also, while groceries have gone up, it's still more expensive to eat out, so learn to cook if you don't already.
market crash - look at your portfolio now. how much of your PA's success depends upon your assumptions of the future being correct? if you've put all your money in a handful of stocks plus some crypto and TQQQ, be ready to ride through a rough patch because as high as those things can fly, they can crash just as hard. this is also where diversification comes into play. the odds of a 100 stock portfolio all going to zero versus a 5 stock portfolio are worlds apart. spread your bets, you won't win the lottery, but you also won't go to the poorhouse. are you buying on margin? some of the worst investment experiences come from this, you margin your shares to buy more and then everything starts crashing and the bank's't give a fuck about your 12mo price target, they want the money NOW, and so money can evaporate VERY quickly. I do not recommend ANYone buy on margin with a large % of their folio, ideally don't do it at all (I don't). if you do, know that you have to be correct twice. you must be correct on the direction of the stock/holding, and that you're correct soon, because anyone who bought MSFT long in 2000 is sitting pretty, but anyone who bought MSFT on margin in 2000 or used MSFT to collateralize a loan got forced out of the position before Azure was even a thing. tread carefully.
other stuff like lower prosperity, recessions, etc - if you've done the above, you are pretty well insulated from the financial effects of a recession, but this doesn't mean you're immune from the psychological. recessions are not fun, particularly long drawn out ones. eventually things are better, but the best way I can describe it is like external depression, you see no way out and it's weighing on the collective world, it can make you bitter, give you tunnel vision, and can infect all parts of your life, and that's OK. it's completely natural. however, just like when you experience depression (I've been very depressed before, had suicidal thoughts and even wrote about it), time, distraction, and focusing on your locus of control will help you get through the day. don't worry about what the economy will be in a few months or years, just get through the day.
if you don't have something cheap/free that brings you joy, find something NOW when you don't really need it. also, find something really hard that you can do, like running, biking, swimming, meditation, really hard yoga/pilates, static breath holds (while lying down on a soft surface for the inevitable blackouts), and so on. it is hard to put on your running shoes when you're always on the verge of a breakdown, however it's even harder to focus on your depression when you're on mile 4 going up a 40 degree hill or the lactic acid is building up in your arms but you still have 500 more meters to go in the pool. distract your mind and do hard things, I cannot promise you will solve anything, but I can promise that if you do enough positive behaviors, however miserable they seem at the time, they should add up to something not so shitty.
check in with yourself. journal, speak with friends, extend compassion. recessions and bad times don't just happen to you, so be that friend that checks on others, they need it. you both may have lost your jobs and seen your PAs go to shit, but you can still have a friendship. on journaling, I've written about this before, but it really does help. check in with yourself, write whatever is on your mind no matter how negative, disorganized, evil, selfish, etc., it may seem. often times in my times of depression my negative cycle of thought was continued by the combined weight of a bunch of disparate negative thoughts, but once I got them on paper, the weight lifted just a tiny bit, but enough to help me get through the day, I hope the same for you.
and in closing, I hope no one has to use any of the above, and I hope that we have a soft landing economically and financially. if not, in times of crisis, it's best to be prepared, rather than be caught flat footed. for my part, I've noticed that once I've put the pieces in place to ride through a crisis, I worry significantly less, because I've done what's in my control. I hope the same for you, and would welcome a discussion if you have personal tactics to share or any questions on the above.