Market Commentary: Wild Market Moves Continue
Written December 17, 2018
As I write this, there are ten trading days left to go in 2018. And many are saying it’s “now or never” for the market to spread some holiday cheer. The general market has been range-bound for a couple of months now. Below is a chart of the S&P 500 with the range marked out between two blue lines:
The challenges for investors don’t end with just stocks. Bonds, precious metals, and oil are also down this year; in fact, 90% of the 70 asset classes tracked by Deutsche Bank were posting negative total returns in dollar terms through mid-November, according to The Wall Street Journal.
The big question remains: is this a market “consolidating’ (taking a breather before moving higher) or is this the beginning of a Bear Market? (A Bear Market is defined by an index dropping more than 20% from its high.)
If you were to rely on the media, you’d see quotes like:
- “It’s not a safe market. It’s a treacherous market. This is the most treacherous market I’ve seen in many a year.” (CNBC)
- “Could be worse than 1929.” (CNBC)
- “I'm pretty sure this is a bear market.” (CNBC)
- “Are You Ready for the Financial Crisis of 2019?” (NY Times)
What’s interesting is that market predictions (both good and bad) are a complete toss of the coin. There’s an adage that says the stock market has predicted nine of the last five recessions. One of these times, it’ll be right. But the fundamentals – earnings growth, GDP, unemployment, and even interest rates – aren’t pointing to a recession in the next nine months. The market is instead reacting to the “what-ifs.” What if the trade war with China isn’t resolved? What about Brexit? Italian debt? Interest rates? Slowing economic growth? A possible global recession and how it would impact the U.S.? Student loan bubble? The list goes on. And those are all valid concerns. But there are always concerns in the global economy. There has never been a time when there wasn’t a list of worries as long as your arm. So instead of focusing on what we can’t control, let’s focus on what we can.
If you’re more than five years away from retirement, remember these tips:
- Volatility is part of investing. Take that as a given and don’t stress about daily gyrations.
- Don’t try to time the market. If you sell when you think the market’s peaked you’ll likely be wrong.
- Keep adding money to the market at regular intervals. This strategy, known as dollar-cost averaging, smooths out your purchase price over time.
- Diversify your portfolio to reduce overall risk and think outside of the standard stock/bond mix. There are other investment types out there that aren’t correlated to stocks or bonds.
If you’re less than five years away from retirement or are already retired:
- Check that your allocation is appropriate for the stage of life you’re in. Make sure your accounts haven’t accidentally drifted toward too much in stocks.
- Consider a bucket strategy for your investments that lets you clearly see “safe money” as separate from “growth money.” For example, you could invest five years’ worth of income in conservative investments and the next five years’ worth in less conservative ones. With the rest, you can relax knowing you probably won’t need it for ten years so it can weather the short-term ups and downs.
- Remember that even when investing conservatively, volatility and periods of negative returns will happen. If you want long-term returns that are higher than the yield on a savings account, volatility comes with the territory.
And here’s my number one tip: don’t check your account balances simply to look at them. Just checking them usually creates anxiety that leads to emotional decisions, and those can be some of the biggest mistakes investors make.
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Disclaimers and Notes
Registered Representatives offering securities and advisory services through Cetera Advisor Networks LLC, member FINRA/SIPC, a broker/dealer and a Registered Investment Advisor. Advisory services also offered through McDaniel Knutson Financial Partners. Cetera is under separate ownership for any other named entity.
The views are those of Victoria Bogner and should not be construed as investment advice. All information is believed to be from reliable sources, however, we make no representation as to its completeness or accuracy and is not a complete summary or statement of all available data necessary for making an investment decision. Any information provided is for informational purposes only and does not constitute a recommendation. Economic and performance information is historical and not indicative of future results.
Investors cannot invest directly in indexes. The performance of any index is not indicative of the performance of any investment and does not take in accounts the effects of inflation and the fees and expenses associated with investing.
Because dollar cost averaging involves continuous investment in securities regardless of fluctuating prices, the investor should consider his or her financial ability to continue purchases through periods of falling prices, when the value of their investments may be declining. Dollar cost averaging does not ensure a profit.
Exchange-traded funds are sold only by prospectus. Please consider the investment objectives, risks, charges and expenses carefully before investing. The prospectus contains purchases through periods of falling prices, when the value of their investments may be declining. Dollar cost averaging does not ensure a profit.
The S&P 500 Index is a capitalization-weighted index made up of 500 widely held large-cap U.S. stocks in the Industrials, Transportation, Utilities and Financials sectors.
A diversified portfolio does not assure a profit or protect against loss in a declining market.