If we’ve been doing our job as your fiduciary advisor, you might already be able to guess what our take is on the current market news: Unless your personal goals have changed, stay the course according to your personal plan.
Still, it never hurts to repeat this advice during periodic market downturns. We understand that thinking about scary markets isn’t the same as experiencing them.
So, what’s going on? Why have stock prices suddenly become volatile after such a long, lazy lull, with no obvious calamity to have set off the alarms? While we could point out fears of inflation, interest rate movements, and other potential reasons, we can’t (and no one can) know for sure what exactly moves markets on any given day, and this does not inform us of what will happen next. Sometimes, market setbacks are over and forgotten in days. Other times, they more sorely test our resolve with their length and severity. We can’t yet know how current events will play out, but we do know this:
- Capital markets have exhibited an upward trajectory over the long-term, yielding positive, inflation-beating returns to those who have stayed put for the ride.
- If you instead try to time your optimal market exit and entry points, you’ll have to be correct twice to expect to come out ahead; you must get out and back in at the right times. This might feel good at the time, but investors have lost a lot of money attempting moves such as these.
- Every trade, whether it works or not, costs real money.
Also, be wary of hyperbolic headlines bearing superlatives such as “the biggest plunge since …” While the numbers may be technically accurate, they are framed to frighten rather than enlighten you, grabbing your attention at the expense of the more boring news on how to simply remain a successful, long-term investor.
Instead of fretting over meaningless milestones or trying to second-guess what U.S. economics might do to stocks, bonds and inflation, we believe the more important point is this: Market corrections are normal – and essential to generating expected long-term returns. In fact, periodic setbacks ranging from mild to severe are more “normal” than the record-breaking S&P 500 run-up we’ve been experiencing lately.
With that said, however, if volatility concerns you and you would like to talk more about your personal financial situation, please don’t hesitate to reach out to us.