February, 2022

Market Volatility

January has historically been one of the worst-performing months for the stock market, and this year has been no exception. The US stock market, as measured by the S&P 500 Index, had one of its worst Januarys since 2009. However, when we look at this decline in comparison to broader market history, it is not an anomaly. Below is a look at how often we experience declines. 
 

Market downturns happen frequently but don’t last forever

Standard & Poor’s 500 Composite Index (1951–2020)

Rising bond yields, Federal Reserve uncertainty, and escalating tensions on the Ukrainian-Russian border unsettled markets this month. Last week opened with two successive days of deep early losses that were erased by furious, late-afternoon rebounds. The following two-trading sessions started with strong gains that evaporated with late-session selling.

The most dramatic session was Monday, in which stocks ended slightly higher after hitting intraday lows that saw the NASDAQ fall 4.9%, the Dow shed 1,115 points, and the S&P 500 moved into correction territory. Technology was at the epicenter of the volatility all week as rate fears weighed on the sector. Stocks rebounded strongly on Friday, managing to conclude the week on an upbeat note.¹

Fed Readies Market for Rate Hikes

Last week’s meeting of the Federal Open Market Committee (FOMC) left rates unchanged, though officials signaled short-term rates would likely be raised at its next meeting in March. As expected, the Fed also approved one last round of bond purchases, bringing quantitative easing to an end by March.²

Left a bit more nebulous were details on the pace and timing of reducing the Fed’s balance sheet, a lingering worry of some investors. But Fed Chair Powell indicated that shrinking the Fed’s asset holdings may occur at a faster rate than in past periods of balance-sheet reductions, such as in 2014 and 2017.³

Grant and Tyler take on 5 Personal Finance Myths

A Kilowatt Saved is a Penny Earned

Historically speaking, January is the coldest month of the year here in GTS' home state of Minnesota. However, for our local readers, you may recall that February of 2021 was a bit of a doozy. Temperatures as low as -50 degrees Fahrenheit were recorded in northern Minnesota while the Twin Cities experienced consecutive days of 'high' temperatures never cresting above zero.⁴ This cold snap was part of a trend of unusually cold and erratic weather nationwide, so even if you're not living in Minnesota (we definitely don't blame you!) these tips below can still apply.⁵

With the unknowns of winter weather still ahead of us, most of us are probably just hoping our cars start and our furnaces run predictably until the thaw of spring arrives. But have you given much thought lately to how much that furnace is costing you to run?

Saving energy can save you cash, so we aim to arm you with a few energy-saving tips that can also lead to more money in the bank!

Energy Saving Tips

  Light Bulb Moment - While lighting only accounts for about 5% of an average household's energy use, switching out your bulbs is a quick and easy way to save energy immediately.

Energy efficient bulbs like CFLs and LEDs use 65-80% less energy while also lasting 10 to 25 times longer than traditional incandescent bulbs, respectively. While they may cost more than those traditional bulbs, your energy savings will already more than cover the cost of the bulb within a year.⁶ If you really want to go above and beyond, you can also consider utilizing specific lighting controls like motion sensors, dimmers, or timers that fit the needs of your household!⁷

  Please Do Not Feed the Vampires -  Did you know that common household electronics like TV's and computer accessories drink up several watts of power even when they are not in use?⁸

According to the Department of Energy, 75% of the electrical use by such devices actually happens when they are turned off.⁹ One easy way to cut off the supply to these "energy vampires" is to plug them into a power strip with an on/off switch, and when you're not using these electronics, flip the switch.

   Degrees of Saving - Depending on your household schedule, you may be able to save big by installing a smart thermostat.

Programing it to taper its heating and cooling levels while you are away or overnight can save you money and barely impact the comfort of your daily life. The Department of Energy estimates savings of about 1% for each degree of thermostat adjustment per 8 hours. If you're able to scale your settings 7 to 10 degrees from their normal settings for 8 hours per day - perhaps sleep a little cooler at night in the winter and don't blast the AC when you take that summer vacation) - that could translate to an annual savings of up to 10%.¹⁰

  Aim for the (Energy) Stars -  Major appliances, particularly your washer and dryer, refrigerator, and dishwasher account for close to a quarter of total energy consumption in an average household.⁶

Most of us are not replacing these items any sooner than is necessary, but when you are, look for options with ENERGY STAR certification. These will consume less energy in use even when they are in standby mode. Remember every appliance has two price tags- the purchase price and the operating cost over the life of the machine.⁸  Regardless of what type of appliances you have, be sure to keep them serviced and cleaned, and try to only run your washers with full loads of laundry or dishes.

  In Hot Water -  For the average household, water heating can amount to 12-18% of overall energy consumption. Where you can, seek to minimize your use of hot water.

One particularly effective way to do this is by washing all your laundry in cold water. About 90% of the energy your washer uses goes towards water heating when you run a cycle on hot, and most detergents these days are made to be most effective with cold water.⁷ Similar to your other appliances, when the time comes to replace your water heater (about every 10-15 years), look for an efficient model that will serve the needs of your size home and family. You can also insulate your water heater and the first 6 feet of pipes coming from it to minimize energy loss.⁶ If you ever find your water coming through the faucet is too scalding hot, you can probably turn down the thermostat on your hot water heater.

  A Window of Opportunity -  If you want to talk about throwing money right out the window, it is estimated that 10-25% of your heating bill is the result of heat loss through your windows.⁶

While windows are certainly quite a bit more expensive than an energy-efficient lightbulb, the magnitude of energy-saving potential with quality windows is enormous. In cold climates like Minnesota, it is recommended to have double-pane, gas-filled windows with low-emissivity (low-E) coatings that can significantly reduce heat loss.⁶ If new windows are not in your short-term budget, even curtains can help reduce unwanted heat loss or gain throughout the year by adding another layer of insulation between your indoor climate and outdoor conditions.

  Seal the Deal -  Ok, not that kind of seal. Have you ever seen a thermal image of a house in the winter to demonstrate heat loss? It is fascinating but can be quite depressing if its your own home.

Heating and cooling make up to 48% of home energy consumption so any strategies to reduce heat loss can amount to a great deal of savings. If you're on a budget, seek to do small things like adding a bit of weatherstripping to leaky exterior doors, caulk to fill gaps where plumbing and ducting comes through walls and floors, and add foam gaskets in the space behind electrical outlet covers.⁸ If you're seeking to invest a bit more into prevent heat loss, consider examining your home's siding, and the insulation in your walls, crawls spaces and attic, especially if you have an older home. Homes built before 1950 that have insufficient insulation are found to use 60% more energy per square foot than homes built after 2003 (so it's a good thing those old houses have character!!).

The U.S. Department of Energy estimates that the typical household can save 25% on utility bills with energy efficiency measures. The price of household site fuels is only projected to rise over time due to increasing production costs, so why not make an investment in energy efficiency today?⁶

Staying Mentally Sharp at Every Stage of Life

The fear of losing cognitive function is very common amongst Americans. According to the CDC, we are twice as fearful of losing our mental capacity as we are of having a diminished physical capacity, and at least 60% of adults have concerns about memory loss.¹¹ With age being the number one risk factor, the truth of the matter is, if we are lucky enough to live a long life, cognitive impairment is a real threat to our enjoyment of our golden years.

Despite what some skin care product advertisements might say, aging cannot be reversed, but thankfully there are strategies we can employ throughout life to keep our minds sharp and our memories like a steel trap. Read on for a list of lifestyle tips and fun activities you can employ today to get the most out of your tomorrows.

Lifestyle Tips

• Keep Moving - This first tip should come as no surprise, because physical activity is good for basically all aspects of health. Staying physically active can improve your mood, reduce stress, help you sleep better (see your next tip!), and help eliminate some common medical conditions that are risk factors for cognitive decline such as diabetes, depression, high blood pressure, and high cholesterol.¹²
• Catch your Z's - While it is normal for people to experience sleeping difficulties with age, it is still so important to do what you can to stay on a consistent sleep schedule and seek guidance if you are dealing with a sleep disorder. Insufficient sleep can impair memory and learning at every age but becomes all the more important later in life.¹²
• Stay Social - Social interaction stimulates the brain. In the past couple of years, we probably have all experienced a little bit of loneliness and feelings of isolation with the pandemic, but this is especially true for those who live alone. Make a point to connect with friends and family often, even if it requires spending time outside or online to do so!
• Eat Like a Greek - A number of studies have recently drawn a link between following a Mediterranean diet and reduced cognitive impairment.¹³ While that exact diet might not fit everyone's preferences or needs, we can certainly take a few tips from our Greek and Italian friends. Aim to eat a diet low in fat and make olive oil serve as one of your main sources of needed fat. When given the option between processed foods or plant-based options - you guessed it - choose the plant based whole grains, vegetables, legumes, fruits, nuts, and herbs. For protein, reach for the fish and poultry over red meats. And of course, no diet should be completely devoid of sweets, just enjoy in moderation!¹⁴ 

Fun Activities

• Independent Brain Games - There are number of stimulating brain games that challenge your memory, concentration, and focus such as Sudoku, Crossword Puzzles, and the viral word game called Wordle. If you're not interested in games, you can experiment with things like counting backwards from 100 by multiples of 7's, or trying to do activities of daily living with your non-dominant hand!5
• Partner Games - Find a partner to play card games, chess, or do a jigsaw puzzle together. Any brain games played with others are a bonus because you are getting social engagement also! 
• Gather a Group - Grab some friends and start a book club, a walking or yoga group, or even start a choir or band! Learning something new like an instrument or a new yoga pose with friends challenges and invigorates your brain while again, staying socially connected. It's a win-win!¹⁵

Quiver the Second Arrow- The Paradoxical Power of Self-Compassion

Think about the last time you experienced some sort of a failure or disappointment, how did you respond to it?

For many of us, our natural first response is to be self-critical. Despite the advice we have all heard about treating ourselves like we would treat a friend, we berate, blame, and judge ourselves. "I'm so bad at this…I should have known this would happen…Things are never going to change, so why even try?"

While we can't always control the situation or circumstances we are in, it can be helpful to shift to the controllable- how we respond. Consider this Buddhist parable-

If a person is struck by an arrow, it is painful?
If the person is struck by a second arrow, is it even more painful?
In life, we can't always control the first arrow.
However, the second arrow is our reaction to the first.
This second arrow is optional.¹⁶

Rather than choosing to take another painful hit, what if we chose self-compassion instead? While this recommendation may sound placating or over-simplified, it is actually backed by a major body of research, pioneered by Kristin Neff, an associate professor of educational psychology at the University of Texas at Austin.¹⁷

Read on for a list of some of the top scientifically-established benefits you could enjoy if you were to quiver that second arrow, so to speak, and opt to give yourself some love instead:

Mental Health and Wellbeing - It should come as no surprise that people who are more naturally inclined to respond to mistakes or personal shortcomings with self-compassion are less likely to experience anxiety or depression, and more likely to report general life satisfaction. Generally speaking, self-compassion breeds psychological resilience in the face of life's challenges.¹⁷

Motivation and Performance- A common counter-argument against this approach is that self-love might lead to laziness or low willpower. Don't we sometimes need that inner critic to motivate us to make necessary changes? In fact, the evidence suggests the opposite to be true! Through a series of experiments in 2012, Neff found that people with high self-compassion show greater motivation to correct their errors, improve on their personal weaknesses, spent more time studying for a test after failing the first time, and even displayed more determination to make up for a perceived moral transgression such as betraying a friend's trust.¹⁷ While it might seem paradoxical at first, self-compassion seems to create a sense of safety that allows for us to confront our personal failings rather than becoming overly defensive or succumbing to feelings of guilt and shame which usually only drives more of the undesired behavior.¹⁸

Physical Health- Want less back pain, headaches, nausea, and respiratory problems? Try being more compassionate to yourself! We often forget how closely our mental and emotional wellbeing is tied to our physical health, but indeed, in a 2018 study by the Journal of Health Psychology, researchers found these physical ailments to be much less common in people who tend to practice more self-compassion.¹⁹ This is likely due, at least in part, to the fact that people with higher self-compassion tend to take better care of their bodies through their behaviors.¹⁹ Additional researchers suggest that avoiding that 'second arrow' can help reduce the release of common inflammatory stress hormones in the body which can damage our tissues in the long term.¹⁷

If you read the above, and your first thought was, 'Well, that's great for all the self-compassionate people of the world, but what if I'm just not one of them?' Don't worry, there's hope! Self-compassion is a skill, not a permanent trait, and like any other skill, it can be trained with consistent practice. When situations arise and you have that second arrow aimed and ready, take a moment to acknowledge the feelings you're having, remember that you are probably not alone those feelings, and do your best to choose kind words in your self-talk. And be patient. No one will do it perfectly 100% of the time, and the last thing you want is to be berating yourself for not being self-compassionate enough.¹⁸

Footnotes and Sources

^{1. CNBC, January 24, 2022}

^{2. The Wall Street Journal, January 26, 2022}

^{3. The Wall Street Journal, January 26, 2022}

^{4. DNR.State.MN.US, March 2021}

^{5. Weather.com, March 2021}

^{6. Energysage.com, July, 2020}

^{7. Energystar.gov, January, 2022}

^{8. Energy.gov, December 2011}

^{9. FamilyHandyman.com, December 2021}

^{10. Blog.directenergy.com, April 2018}

^{11. CDC.gov, February 2011}

^{12. MayoClinic.org, 2020}

^{13. Medicalnewstoday.com, April 2020}

^{14. MayoClinic.org, July, 2021}

^{15. Lifeline.Ca, January, 2022}

^{16. Mindfulnessmeditation.net, January 2022}

^{17. BBC.com, January 2021}

^{18. TheGrowthEq.com, January 2021}

^{19. Evolvingminds.org.uk, January 2021}

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