With the recent craziness in the world…I wanted to reach out to hopefully address some of the recent movement in the markets.
First, I’d like to remind everyone who may be a bit nervous, that this too shall pass. I recognize the markets are juggling about 4-5 main issues at the moment (The Fed and Inflation, Ukraine, Supply Chain Issues, continued Covid shutdowns in China, and US Politics).
Personally, when the market begins to swing like it has the last couple of weeks, I get excited that we are potentially closer to the short-term bottom. The larger swings of 3% or more traditionally occur closer to these low spots. Ironically, the largest up swings tend to show up around this same time period as well.
Second… pullbacks are normal. We all hate when the market takes a time out and you’ve probably heard me say every now and then the market needs to go cry in the corner. How often you ask? Historically the S&P 500 market index will experience a 20% pullback roughly every three years. The other “normal” 10-15% swings are almost every year like clockwork. Check out last week’s article “A Closer Look at the Market Correction”. In fact, the last 32 of 42 years we’ve seen a 14% decline, the S&P 500 still managed to generate a positive return for the year. (Source: J.P. Morgan).
Since the Covid shutdowns in early 2020, the markets have experienced smaller swings than “normal” and this often gives everyone a false sense of security. Some would even say we were overdue for this type of movement.
Third, and this is the main reminder…Most of our clients have a financial plan built around their investments and we know your overall big picture goals, retirement needs, monthly cash flow, emergency funds, any debt, etc. As I’ve been reviewing these plans recently, I haven’t seen any real changes to that big picture for people. Market moves are already factored into these plans.
In closing, if you find yourself having questions or concerns please give us a call. George and I have some open times in our schedules now that we are past the start of the year. If you’d like to set a time to come in, meet over coffee, the phone, or Zoom just give Terry a call to set something up and we can discuss how this affects your big picture plan. For those who still need a plan let’s get that set up right away.
Phil Guerrero, CFP®
J.P. Morgan Guide to the Markets
Stock investing includes risks, including fluctuating prices and loss or principal. This information is not intended to provide specific advice or recommendations about any stock nor is it intended to be a recommendation to buy, sell or hold any stock investment. We suggest speaking with your financial professional about your situation prior to investing.
Please consult your financial advisor regarding your specific situation. The opinions voiced in this material are for general information only and are not intended to provide specific advice or recommendations for any individual. All performance referenced is historical and is no guarantee of future results. All indices are unmanaged and may not be invested into directly. All investing involves risk including loss of principal. No strategy ensures success or protects against loss. This information is not intended to be a substitute for specific individualized tax advice. The Standard & Poor’s Index is a capitalization weighted index of 500 stocks designed to measure performance of the broad domestic economy through changes in the aggregate market value of 500 stocks representing all major industries.