Broker Check

Recent Markets and Your Accounts

May 13, 2022

In this period of market volatility and uncertainty, it is natural to feel angst and distress. Fighting off emotion and staying grounded in reason is crucial in times like these. You have a plan and an objective, and market swings should not disrupt them or steer you off course.

From what we can discern, the volatility we are seeing now is unlikely to let up in the short term. We don’t usually recommend selling when accounts are down. Exceptions to that could be unanticipated changes in investment time horizon or distribution needs. Things to consider then, are whether a life-altering event has occurred, or an unexpected short term distribution need has arisen. Adjustments can be discussed, if necessary, to account for those types of changes. Otherwise, while watching the market go down is nerve-racking at times, the big picture is that your investment time horizon is years; not weeks, months, or quarters.

Accounts are typically broadly diversified and not fully invested in equities (stocks). Portions of portfolios are also divided up across fixed income positions (bonds). Keep in mind that bond funds traditionally used to buffer volatility are generally negative this year too, and will likely continue to be until interest rates flatten. Therefore, moving more to fixed income positions would also likely result in short term negative returns. 

Cash positions usually won’t fluctuate on paper, but we know inflation is at the highest rate in 40 years so cash positions lose purchasing power everyday, and a loss in buying power is a real loss. The difference between the true rate of inflation and the rate you earn on your cash in the bank is the rate at which you are losing, and it’s substantial right now.

Concerns in times like these are not uncommon, but our belief in the investment strategy you have is unchanged. Market volatility tends to work in cycles. We happen to be in one of those cycles right now and the pendulum has swung away. Pulling out of positions in the cycle we’re in locks in losses. Picking the “right time” to buy back into those positions is something very few ever have success doing as the most common outcome is selling low and buying back in higher; the recipe for failure. Holding, and staying true to your strategy means you will have the same number of shares in all of your positions so that when the pendulum swings back, you are primed and set to recapture the growth that occurs with market recoveries.

We are always available to discuss things with you, anytime you feel the need. We are always looking out for your best interests, and our recommendations and guidance always reflect that.