Calm Before The Storm

Calm Before The Storm


By William Jed Mayfield

Retirement Income Specialist

Mayfield Financial & Estate Protection Services, Inc.

The Best Practices Used to Create Sustainable Streams of Retirement Income



The calm before the storm. While that phrase originated in regard to weather, it can also perfectly describe the financial markets. If you think about it, recessions and financial crises tend to occur after we see periods of low volatility. It makes sense; during an economic recovery the economy picks up and business cycles expand as normal. After a while that leads investors to take more risks and to become more complacent—this is the calm. But then, all of that complacency can put people into risky assets that don’t make much sense, especially for those in the retirement red zone (those who are planning on retiring in the next year or two, those who have just recently retired, or those who have retired in the past 5 or 6 years). Once an overwhelming amount of data comes out that shows a recession is on the way or that a serious downturn is right around the corner, investors panic and start selling—this is the storm.

If you go back through history, you’ll see that this pattern repeats itself endlessly. I bring it up because we can use this pattern to analyze our economy today, and it appears a storm is on the horizon.  When you consider that stock market volatility is at the lowest level ever recorded, the official unemployment rate is the lowest levels we seen since 2007, stocks are more expensive than ever before, and central banks around the world are starting to tighten up monetary policy (raising interest rates).  Then, add that with the fact that our current economic expansion is the second longest on record entering its ninth year.  Could this be the calm before the storm?

The biggest mistake you or anyone could make right now is to believe that the calm that we are seeing now will last forever—it won’t.  History shows otherwise.  That means that you must find someone who can help you plan for your retirement with an eye upon that storm and be prepared to avoid ruining your perfect retirement.  You see, you can’t change the world. You can’t change what is going to come.  But you can change what you have in place to prepare for it.

Many of my radio listeners who have taken the time to get and read my free Safe Money book and then to come in and talk to us, have been very happy with the information. It gives you a good platform to be able to better talk about what is available to you. The topic lately seems to be that everything is just “too perfect” for their comfort, with all the people celebrating the highs and everything going up, up, up.

It is good to recognize that explanation of such things is not always the same as justification. The market adage has it that markets climb the wall of worry and slide down the slope of hope. The trouble is that almost by definition the unexpected events that hit markets cause the most trouble for the retired and pre-retired investors that haven’t taken the time to put in place a solid foundation for their retirement plan that can handle any type of market correction, either now or in the future.

Most investors like to believe that bear markets only come with recessions; unfortunately, this is both useless and wrong. First, twenty percent drops sometimes happen outside of a recession, such as in 1966 and 1987. Second, as history has pointed out, the longer a financial cycle goes on, the more likely it is to turn into excess and end badly. Worse than that, there is no reliable method for forecasting a recession. So you should have the proper plan in place right out of the gate, with the right amount of money in the particular places necessary to do the job of taking you through your retirement years. A certain amount of money designated to take care of all the income and the essential needs; a certain amount of money set aside for discretionary funds that are for that type of expenditure.

With that being said, there is no way to say when the next dip is going to come—investing is about probabilities, and the chances of a nasty reaction to an unseen surprise. So here’s the best advice: it’s when everything is at its best that it is time to do the proper planning to take care of the future, even if it means missing out on some of the gains that might carry on. You’ve got to have the proper planning in place; if you do you’re going to have a worry-free retirement plan in place and you’ll be able to enjoy all the years ahead of you.


For further information or a free consultation, contact me:

Wm. Jed Mayfield, President

Mayfield Financial & Estate Protection Services, Inc.

Phone # 520-322-9773