Momma Said There'd Be Days Like This

Over the past week, the markets have given us what I feel is a long overdue dose of reality.  Ever since the market’s recovery out of the “Great Recession” in 2008 and 2009, we’ve had an almost uninterrupted rising market.  While it’s been great to see our account balances recover and grow, markets like that always seem to lull people into not paying much attention.  Then, when the market pulls back, it makes it seem worse than it is.  So is this market, which NBC last night said “plunged” and an online market report I read this morning said “spiraled downward”, really that bad or out of the ordinary?  Let’s think about this…

  1. Is anything different than it was a week ago?

    1. Unemployment is still at almost historic lows.According to the last published number by the US Bureau of Labor Statistics (BLS), it’s at 4.1%

    2. Inflation, while it has crept up is still low by historic standards.Again, according to the BLS, it’s at 1.8%

    3. Corporate earnings are still high (a recent statistic from the Federal Reserve Bank of St. Louis puts corporate profits at 9.5% of GDP versus a long term average of 6.6% since 1950)

  2. Have Your Personal Circumstances or Goals Changed?

    1. Do you still have a job?Is your company secure?

    2. Have you changed when you plan to retire?

    3. If you’re retired, are you still getting social security, pension, or portfolio distributions?

  3. Are You Still Saving for Retirement or Other Purposes?

    1. If you are making regular contributions to an account, would you rather buy at all time high prices or does the occasional “bargain” seem like a good idea to you?

It’s easy to let a down market seem worse than it is, especially if you spend too much time listening to the folks whose job it is to report news even when there isn’t much happening.  If you’re having trouble with the market’s behavior, here are a couple of things to try:

  1. Turn off the TV and go for a walk.(OK, if you live here in the upper Midwest you might want to walk on a treadmill because it’s below zero outside!).

  2. Take an objective look around you.How are things really? Understand that the investment marketplace goes up AND down.It’s normal.Are today’s results really going to change your life? (here’s a test: the last time we had a large down market day like we’ve had this week was in 2011 – about 7 years ago. Do you remember that day and has it affected your life since then?Probably not, which means that bad market days don’t matter too much in the long run.)

  3. If you are still really concerned, meet with your investment professional to review your investments and your goals and time horizons.If something is “out-of-whack”, you can rebalance things to help you sleep.

As always, thanks for your attention and, if there is a topic you would like me to address, feel free to shoot me an email at greg@affinityassetmanagement.com.