For many people, this weekend is going to be filled with watching basketball. After a year hiatus, March Madness is back! All teams traveled to Indiana and all games will be contested in various arenas throughout the state. It is truly another step in our return to normalcy.
When thinking about the upcoming games, I found it interesting how basketball can be similar to one’s own life. This morning, 64 teams began competing to be crowned National Champions. Over the next few weeks, there will be close games, blowouts, tears (both happy and sad) until finally the champion is crowned. However, to make the tournament let alone win the championship takes months of preparation and practice. This is exactly what you are doing in your lives but on a much larger scale.
It is taking years for you to try and accomplish all that is important to you. For some, it can mean diligently saving towards retirement while for others it can mean starting and growing a business. None of your goals happen overnight. It is only through a long-term vision with a plan where someone can put themselves on the path towards their ultimate goal. It is a process.
Since the Fall, the basketball teams have been playing. With all that is going on, some have missed games and players due to the pandemic, while others have had to overcome injuries or transfers. Overcoming obstacles is what life is all about. There have been and will continue to be unexpected instances where you will need to make changes in your life. These changes can include new jobs, new cities, or even new healthy habits. While the reason for the change is important, what is even more important is how you respond to this change. When it comes to wealth management and financial planning, we help you change your plan as life-changing events occur.
After competing in the regular season, teams get chosen for the NCAA Tournament. Each year there are some teams who the “experts” think should or should not have been chosen. No team wants to be on the bubble, meaning they are unsure if they are going to get chosen. If they do end up on the bubble and ultimately do not make the tournament, they can usually look back at a few games which they lost. However, just saying they lost a particular game is not enough. To improve, the team needs to evaluate how the team performed in specific areas throughout that particular game which lead to their ultimate loss.
In our life, we all make decisions, decisions which can impact us long-term. While one decision can have a long-term effect, many more times it is a collection of many decisions which have caused an ultimate outcome. For example, we all know individuals who always had big houses and new cars, but as they got older, they had no money saved for retirement. Their retirement shortfall was not purely due to the one extra luxury car purchase, rather it was caused by a combination of purchases over many decades. The decisions we make today and tomorrow, while seemingly small, when taken as a whole, can have a significant impact on our lives.
For many people, the beauty of March Madness is it is one and done. You lose and you go home. The team that can go on a six-game winning streak at the right time will be the National Champion. Teams are seeded 1-16 in four different regions. Since the tournament was created in 1939, the lowest-seeded team to win the national championship has been number 8 seed, Villanova, in 1985. While a lower-seeded team has never won the entire tournament, many teams have gone on ‘Cinderella Runs’. This means a low seeded team wins a few games in the tournament and makes it much further than anyone expected. If a team is on this run, it means they beat higher-seeded teams, teams, who were “supposed” to beat them.
This is like life where there are times where we hear about the individuals who won the lottery or invested in the hot stock. They may have gone on their own ‘Cinderella Run’, but many then lost it all. For every success story we hear, there are numerous stories of future failures where the Cinderella Run fails.
Finally, with the National Champion crowned, only then can ‘One Shining Moment’ be played. The emotion of the entire season is remembered, and the new champion can begin celebrating.
In our lives, rather than one shining moment, we have a collection of shining moments. Your shining moments are achieving your goals (sending children to college, retiring, selling a business, gifting money), whatever they may be. It is through achieving your shining moments, where all the hard work of life comes together.
‘One Shining Moment’- Arizona Wildcats 1997
As we look to the economy and markets; vaccines, government policy, company profits, and interest rates have the potential to be the driving forces for the months to come.
- Vaccines hold the key to a full economic reopening. The more vaccines given, the greater the ability for economic expansion. The Federal Reserve announced this week that it expects the economy to grow at an annualized rate of 6.5%, an increase from the 4.2% forecasted in December 2020. This increase is due to more people getting vaccinated.
- President Biden signed the $1.9 trillion dollar stimulus package last week with individuals already starting to receive benefit checks. This stimulus is in addition to the $3.4 trillion in stimulus passed in 2020. While there are long-term effects to the stimulus, over the short-term the economy should see the stimulus as a tailwind. Additionally, the Federal Reserve has remained committed to providing monetary stimulus through maintaining near-zero interest rates and continuing with their bond-buying program. The Fed controls the Fed Funds rate.
- Companies are doing well. They had a strong 4th quarter with positive year-over-year growth. There is the potential for this earnings growth to continue as the economy reopens. Typically, as companies see earnings growth, stocks tend to perform well.
- If there is one area, we are watching it is the increase in interest rates not directly controlled by the Fed such as the 10 Year Treasury. Usually, rates increase in an improving economy. This is what we are seeing now, however, the speed of the increase in rates has the potential to affect the economy and stock market. If rates increase too much too fast, consumer and business loans in addition to returns on investments may be affected.
Each day more and more people continue to get vaccinated. With each vaccination, our economy and our lives get closer to normalcy. Not only normalcy, but the success of the vaccine will affect government policy, company profits, and interest rates.
Enjoy the weekend, be it basketball or even just the weather, and keep an eye out for your ‘One Shining Moment”.
Chris Zeches, CFP®