Ever had to make small talk with somebody? You’re standing in line at the DMV, waiting for your morning Starbucks, or sitting awkwardly in a doctor’s office with magazines that were new 5 years ago. Suddenly, someone says it: “Some kind of weather we’re having, huh?” Snow, rain, sunshine—any and all are in fact some kind of weather. It’s the question you ask when you don’t know where to take the conversation and a topic everyone can relate to. Everyone, after all, deals with the weather.
In finance, we have our own version of the “weather question”: what’s the market going to do in the next year? Are we going up, down, sideways, loop-de-loops? Lately that’s been followed by a statement relating—good or bad—back to the political realm as well. While politics certainly hasn’t been stable, in all seriousness I believe we’re still in pretty good shape for the rest of this year and into the next as well.
I’ll be the first to admit that the market has seen some crazy turbulence in the last few months, especially earlier this spring. Politics helped fuel fear one week of sudden market downturns, then buoyed up hope the next for record highs. In other words, it hasn’t been a steady ride so far.
According to GF-PC Asset Management, their key insights were as follows:
That being said, we may be dealing with a pattern of sharp gains/losses throughout the rest of the year. I still think that generally we’re set to have a good year. However, if you’re planning on staying invested throughout the rest of 2018, be ready to answer your advisor’s phone calls to talk strategy. If you’ve been mulling over the idea of an account review, great—pick up the phone and make an appointment before the holidays hit.
The main goal is to make sure your portfolio is diverse enough to handle future up-and-down patterns in the market. Owning a variety of investments is what we mean by diversification.
Diversified portfolios are designed to move slower than just investing directly into an index. It’s critical to keep in mind that these diversified portfolios DO NOT keep pace with the actual index. If you turn on the news and see the market is up YTD 5.89% and start calling your advisor asking why your account is lagging at 2%, it’s because that’s what your account is designed to do! It’s not going to grow as fast as the index; conversely, it’s not going to drop like the index when it turns downwards.
Last week our office hosted a webinar titled “Understanding Market Corrections”. We geared our webinar towards addressing what’s been going on in the market, and how you have to keep in mind that politics and economics are separate issues. We can’t do much to control politics; with our financial portfolios, it’s a different story.
My advice this week is to focus on what your goal was when you met with your advisor. If you told them you wanted to earn an average of 4-6% per year, remember, that’s an average. You will have years where your account doesn’t earn as much as you’d like, years where it’s average, and years where it feels like you hit the lottery. That’s the nature of our market and the pattern of a healthy, diversified portfolio. If your advisor is doing the job you hired them to do and you’re hitting that average goal, then you’re on the right track.
We continue to push for everyone to learn more about how to improve their financial health. We’ll be working on more webinars, blogs, and educational classes to keep the Kentuckiana area up-to-date on market trends. If you’d like to join us, simply send us your email address or go to www.MercurioAdvisors.comand sign up.
With that being said, I leave you with this: Some kind of market we’re having, huh?