Good Morning and Happy Spring Break,
Seriously? Is this what Spring Break is supposed to be about? If you are somewhere in Florida or Hilton Head on vacation and anxiously checking your portfolio… then the answer is NO. On the other hand, if you are on vacation and you know that your Adviser “has your back” and your financial PLAN is in place, then the answer is YES. The latter is the definition of “peace of mind.” Peace of Mind does not always come easy – it takes preparation.
A little background:
- The US stock markets have now slipped into negative territory – again – (as measured by the S&P 500 index) for 2018 year-to-date.
- In the first 3 months of 2018, there have been over 22 ONE-DAY moves of over 1% either UP or DOWN in the S&P 500 index.
- This compares with only 8 such moves in ALL of 2017.
Although this kind of volatility warrants comment, it need NOT lead to extreme WORRY for the well-advised and well-planned investor. This is not new news. Here is why:
My long-time readers are aware of two (2) of my favorite editions of TGIF 2 Minutes.
- “Gut Check in Rocky Markets“ (Check it out – timeless read). Readers’ Digest version: Worry about what is in your control, like your SPENDING and CASH LEVELS. And have a plan for investing year-round regardless of market activity to take advantage of volatility. PS. Have an Adviser.
- “Greatest Chart Ever” Readers’ Digest version: The AVERAGE YEARLY DECLINE in the S&P 500 (from high to low) since the early 1980’s (30+ years) is –14%. As we learned in grammar school, an “average” means that reality is sometimes higher than average, and reality is sometimes lower than average. Rarely do we achieve exactly average. Equate this to the stock market in 2018, after 8-9 years of UP stock markets (less than average), we are due for a GREATER THAN AVERAGE DECLINE in stocks… which would be perfectly normal. Not fun – but normal.
The slightly “new” ingredient in 2017…and now in 2018 is that gradually, technology in our world and technology stocks have gone UP, UP and have become a HUGE part of many sectors other than pure technology. For example, “consumer discretionary” stocks (things that we have discretion to buy – or not to buy – like cars, hotel stays, even FOOD purchased online) are affected by how technology stocks perform. Amazon and Netflix alone represent over 25% of the consumer discretionary sector! Consumer discretionary stocks have gone down along with the “techlash” I described in last week’s TGIF 2 Minutes. There needs to be an aspect of your portfolio that addresses this “new” ingredient. (Call me for advice on this.)
It has rarely been as critical to have an Adviser – no less a CFP® – if only to “save yourself from yourself”. Unpredictable behavior in the face of fear is a fact, not opinion. When markets go down, it can be scary, and it pays to have a predetermined PLAN. There are more (new) investors in the stock market every day and every year due to increased savings in 401k plans and declining existence of guaranteed pensions. This fact means that more market volatility – and uncertainty – is to come.
Do not allow volatility and fear to be the basis of your decision-making. Rather have a financial PLAN and an Adviser. Be informed. Enjoy your Spring Break!