A Seatbelt For The Wild Ride Of The Markets
By Monica Weissman, CFP, CIM
February 2019
I am writing this to pass along to you our expectations for 2019.
Here are the opinions on the markets in 2019 from the financial gurus:
1) Stock Market is, and will continue to be, VERY VOLATILE in 2019;
2) There is NO immediate RECESSION on the horizon, for the US or the global economy;
3) There is a SLOWING of the US economy and of the Global economy , recently predicted by the International Monetary Fund, mainly due to the US-China trade tariffs war and to the slowing of the Chinese economy (from 6.6% to 6.4%);
4) If there will be any more significant slowdown in the US , it is expected to happen in the latter part of 2019 or in 2020 when any positive impact of the tax cuts done by Trump in 2017 will expire, and no other measures have been implemented to compensate for it;
5) People are asking the WRONG QUESTIONS: Are we on the verge of a bear market? Should we get out of the market?
Should we get out of equities?
When will the bear market begin? Nobody knows. Right now, there is a lot of posturing going on, and the arguments on both sides sound convincing.
A bear market is certainly coming at some point because that's what markets do, they run in cycles and there is nothing any of us can do to alter the course of events. We CAN'T CONTROL THE MARKETS, but WE CAN control OUR REACTION to it.
We should keep in mind that, time and time again, we have seen demonstration and verification that the BEST CLASS OF ASSETS TO INVEST FOR THE LONG TERM is EQUITIES.
And yes, the markets will go through ups and downs and - wonder of wonders - they will ALWAYS COME BACK! Good quality investments will go down with the markets, but less than the markets overall (downside capture), and then they will go back up with the markets (upside capture). So, there are some selective strategies for dealing with market volatility, and choices that we must make and accept.
Strategies for volatile markets
>>> One strategy (and the best one in my opinion) is to HOLD THE COURSE and STAY INVESTED THROUGH THICK AND THIN. Stick to the long term strategy and focus on GROWTH, and not try to get in and out of the markets because, “it is the time in the markets, and not timing the markets, that will make you win!”
>>> Another strategy is to make some tactical changes to dampen the volatility of the portfolio. This can be done, but at the cost of reduced rates of return. It is not my first recommendation, but if you feel absolutely that you want to reduce the volatility we can look together on what the best changes would be to still maintain some growth. This is good if you need more peace of mind, as the emotional side of the human nature can be greatly impacted by the market roller coaster.
>>> I absolutely DO NOT RECOMMEND getting out of the markets completely and waiting. This strategy is a problem because while we might know that right now we want to get out of the markets... WHEN and HOW is the right time to GET BACK IN? And at WHAT COST? After the market turmoil has ended it will be far too late, the markets will have been back up for quite a while and we will have missed all the COME BACK. It is IMPOSSIBLE TO TIME THE MARKETS, it is IMPOSSIBLE TO TIME THE BOTTOM of the markets, or the TOPS of the markets. IT IS IMPOSSIBLE TO TIME THE MARKETS, period!
Optimistic outcome
So if we can do anything positive when everybody else is focused on the negative, we can decide to be optimistic despite the gloom and doom.
Rest assured of the outcome - the markets always come back. That is what's going to happen when we go into a bear market. The market will go down. The market will come back. And the market will then go on to set a new high again.
The history of the economic cycle is proof of that. The NASDAQ has been doing that since its inception in 1971. The Dow has been doing that since Charles Dow calculated his first average of purely industrial stocks on May 26, 1896.
The New York Stock Exchange was founded on May 17, 1792, and the pattern has never failed to repeat itself. Let's not second guess history.
I hope this helps.
When looking at your current situation you may find yourself uncomfortable and unsure which strategy is the best for you, if you can find the time, please call for a complimentary phone appointment and we will look at everything in detail.
Truly Yours,
Monica Weissmann, CFP, CIM
Financial Advisor | Manulife Securities Incorporated
Life Insurance Agent | Wealth Management by Monica Weissmann
