When I was driving home the other day, I was listening to the radio and that old Beach Boys tune, Wouldn’t it Be Nice was playing. You know, “wouldn’t it be nice if we were older”…you know the song.
I remember thinking yeah, wouldn’t it be nice if the stock market acted like it did in 2017, no volatility, gradually up slope, calm…well that would be nice, but that’s not how the final three months of the year played out; and certainly not the way the first week in January began.
The decline we saw in October and then in December was a little more than a correction. The first week alone in December saw investor portfolios fall by $1.4 Trillion dollars. For the final quarter the market fell 12%. It was down for the year, not that bad though, but it was still down 6%…the first down year in 10 years. So I guess we were due.
One advantage of being in the business for as long as I have, 38 years, is you get to know people with similar experiences but with different perspectives. I was talking to one of these people the other and I asked him what his take was on the current market conditions. He said “sometimes markets go down and if you can’t take a 5 to 10% decline then you shouldn’t be in the market.” He’s always been pretty blunt that way but he’s got a point.
You know, the portfolios we build for our managed account are specific to the goals and objectives of our clients. Although the portfolios aren’t immune to the swift decline we have recently witnessed, we believe they can weather the market environment we are now in.
That said, there is nothing to say that we can’t see the stock market get worse before it gets better; before it stabilizes. We have been through bad markets before and during the bear phase it isn’t much fun looking at monthly statements and seeing declining values, but believe it or not, opportunities come from the trepidation we are now seeing.
Here are a couple of suggestions to get through it: Please don’t measure everything from the top. Valuations were at high levels going into October. If you start with $10 and it grow to $20 and now it is $15 try not to feel like you lost $5.
Secondly, keep your focus on your objectives, not the day to day, week to week or month-to-month market movements. That will frazzly anyone.
Further, ask yourself this question: “How much more does the stock market have to fall before you can’t take it anymore and decide to sell”?
If the answer to this question is it won’t take much more to make you want to sell, then you need to let us know, because if that is the case, it is better to do some selling now as opposed to waiting for another shoe to drop.
On the other hand, if the answer to that question is I can ride this out, then sit tight, buckle up, and stay with your portfolio allocation.
Suffice it to say if you are going to need money anytime in the next year for an expense like a vacation, a new car, a remodel, you name it, it should be in cash NOW.
Finally, remember the great wisdom of Benjamin Graham, the father of fundamental analysis. In his famous book, “The Intelligent Investor” he wrote: “The best way to measure your investing success is not by whether you’re beating the market, but by whether you’ve put in place a financial plan and a behavioral discipline that will likely get you where you want to go.”
And wouldn’t it be nice if it were that easy to do?
Anyway, hang in there; keep us posted, and if you need anything, give us a call.
We’ll be here.
Until next time, I’m Phil Albitz. Thanks for watching.
