Untapped potential in the market and your practice
Interest rates are up, the markets are down, inflation has proven to be anything but transitory, and the economy may very well already be in a recession. Add it all up, and it’s no wonder investors and business owners are taking a decidedly pessimistic outlook on 2023.
Yet with all the negativity, the new year’s glass is not completely empty. Judson Crawford, CPA and Partner at CWA, outlines some of the biggest reasons to be cautiously optimistic about both your portfolio and your practice in 2023.
REASONS FOR OPTIMISM IN THE MARKET
While stocks did emerge from bear market territory in the second half of 2022, the major markets remained down by double-digits entering 2023. However, Judson sees a silver lining in the cloudy stock market picture.
“The positive news is, we believe the recession has already been priced into the market,” said Judson. “So when we start getting some good news regarding inflation or the GDP, the market could rebound rather quickly.”
Whether the market turns in 2023 or 2024 doesn’t really matter to Judson, because equities right now are at a historical discount, and he’s positioning his clients to take advantage of it.
“We’re counseling our clients to right-size their lifestyle, get rid of any short-term debt and look for any additional savings opportunities they can find,” says Judson. “Simply put, a dollar invested now could be worth a lot more than a dollar invested in six or twelve months.”
Another buying opportunity that could emerge in 2023 is in the bond market. Historically, when the stock market is volatile, bonds typically hold their own. That was not the case in 2022, as rising interest rates battered the bond market.
“Bonds took a beating in 2022,” says Judson. “But if you can buy into a portfolio of good bonds at a 10-15% discount, that’s a 10-15% gain if you hold it until maturity.”
Even for those conservative investors who have a short window to retirement, the opportunity to earn a significant return is higher in 2023 than it has been in years. Rates for online savings accounts at the start of 2023 were up in the 3-4% range, with some CDs even higher, which is a far cry better than what investors were seeing less than 12 months ago.
“Does that make me want to shove all my money into savings accounts instead of the equity or bond markets, absolutely not,” says Judson. “But at least for those investors who might be close to retirement, they’re not losing as much to inflation as they were before.”
With buying opportunities in almost every area of the market, Judson says having a professional managing your money is more important than ever.
“A good money manager will make sure their clients are taking advantage of buying in a down market,” says Judson. “That’s why it’s so important to have an advisor you trust to put you in a position to take advantage of those opportunities.”
REASONS FOR OPTIMISM IN YOUR PRACTICE
First, the bad news. 2022 production numbers look to be coming in a little lower than in 2021. (Compare your numbers here.)
Now for the good news. Even if 2022 production ticked down slightly from the stimulus-fueled highs of 2021, they are still expected to be above the pre-pandemic levels of 2019.
“We’ve already made it through a year where the market and the economy are not great, plus there’s no more stimulus money to boost discretionary spending, yet our clients have remained profitable,” says Judson. “There is still a historical growth trend line even if production is down slightly from last year.”
Inflation is another bugaboo that actually has a positive side as well. While higher expenses are making the cost of running a dental practice more expensive and cutting into profits, it also creates an opportunity to raise fees again in 2023. In fact, Judson counsels his clients that a healthy fee increase in 2023 is basically a non-negotiable.
“Because of what’s going on with higher prices across the board, people are much more accepting of fee increases right now, so take advantage of it,” says Judson. “In the short term, you keep the same level of profitability. But as costs come down and your fees stay the same, profitability increases over time.”
Even rising unemployment presents a positive scenario for dental practice owners.
“As unemployment ticks upwards, the job market starts to loosen up,” says Judson. “Suddenly those applicant pools become larger, salaries will trend lower, and practice owners may finally be able to get fully staffed without breaking the bank to do it.”
While there’s no crystal ball to tell us exactly where 2023 will take us, there are many reasons to feel optimistic. For even more perspective on what the year might bring, check out this episode of the Accumulating Wealth podcast.