Sifting Through The Noise
“Stocks have peaked!” “A recession is imminent!” “The sky is falling!” ...
My goodness, it’s noisy out there! Sometimes, whoever yells the loudest is the one who we hear. In the financial markets, the “noise” could be a tweet, or a dire market prediction from a talking head on T.V., or simply a conversation with your neighbor. Regardless, we are influenced by soundbites that scare us. Fear sells! The markets will correct (we’ve already seen two sell-offs in the last 12 months), so sooner or later, the prognosticators will be right. So, should you change courses?
“The stock market is a device for transferring money from the impatient to the patient”
What we know for certain is that no one can time the market consistently or control its outcomes. So, how should you navigate uncertainty and volatility? Consider the three questions below; if you answer “yes” to any, a review of your portfolio is warranted immediately. Conversely, if your answer to all is “no”, stay the course, put on your noise canceling headphones and relax.
Three questions to answer, when uncertainty rises:
1. Has your reason/purpose for investing changed?
2. Have your economic circumstances changed?
3. Do you need to access your investments in the near future?
Epilogue:
Fundamentals of the markets remain healthy. Historically low interest rates, 3.7% unemployment, large amounts of corporate cash sitting on the sidelines, and an economy growing at +/- 2%, would ordinarily prompt reasons to be bullish. We do have a few headwinds - isolationism with the tariffs, Brexit woes, and a perceived global slowdown. Volatility, although uncomfortable, will periodically occur.
— James MacDonald, CFP