I think it is safe to say that this year is not one most people will look back on with affection. We know that, historically, roughly three out of every four years is positive in the stock market. 2019-2021 saw positive annual returns, which simplistically meant we were due this year. Of course, hindsight is 20/20, and using simple averages like that is no way to invest your money. My point is that occasionally, we need these resets to flush the system of excesses. It doesn’t make them any more fun to live through, but hopefully, we learned some valuable lessons.

Markets are difficult. Anyone who says differently is a fool or a liar. Entering this year, many were looking at the potential for inflation to rear its ugly head. However, it has been hard to capitalize. Imagine this: on January 1st, 2022, you were given all the future inflation readings for the year. How would you have invested your money? Gold? Bitcoin (“digital gold”)? Inflation-protected government bonds? The correct answer, and its implications, may surprise you.

It is at the tip of everyone’s tongue. It is the lead story every night on the news. Of course, I’m talking about a recession. Beyond the sensationalist headlines and the actual financial pain felt by millions of Americans lies the question: “What can I do about it?” A pragmatic approach shifts the focus from worrying to doing. These periods are never fun for anyone involved, but they are expected throughout history.

Most things in finance can be simplified into a simple supply versus demand equation. Without having to take an Economics 101 course, changing one or both sides of the equation will affect the price of the good or service in question. Think about the exorbitant prices people are willing to pay for popular sporting events or the hottest Christmas toy – a classic case of demand overwhelming the available supply. On the flip side, the discount bin at a department store represents oversupply related to current demand. Our present inflation predicament is a result of abnormalities in both supply and demand.