Where we are:
The average post-World War II economic recovery is 58 months. Today we are entering the 98th month of the current recovery, the third longest since 1929. The stock market is not to be outdone. As we communicate this, the S&P 500 is up 15.11% over the last year and is in the 8th year of a bull market. You do not need to be an economist to at least question how much longer this will last.
Despite the tailwinds of Hurricanes Harvey, Irma, and Jose, tensions with North Korea, and the current political malaise, the economy and markets are still posting solid results. Consumers are still willing to spend and we have seen stronger corporate profits than expected along with double digit earnings growth.
It’s not time to panic, but it is time to plan
As your financial advisors, we don’t believe it is our role to prognosticate about exactly when the tide will turn but just to remind you that it will. Our role is to help you eliminate the noise and focus on your financial goals and to guide you in making sound financial decisions in light of the current period of uncertainty.
Today, we believe that it is important to recognize that we are likely approaching, if not yet in, the waning part of the cycle. Our goal is to work with each of you to ensure your accounts are invested appropriately to meet your need for income in the short term (if any) with an eye toward growth over the longer term.
Make practical not emotional decisions:
We know from past experience that a significant correction impacts not only your account values, but also has the potential to wreak havoc with your emotions. We remember the fall of 2008. While we discourage changes to investment strategies based solely on emotion, we are all human. Investing is both an art and science when it comes to sleeping well at night. There are some practical steps we can take to increase the likelihood of a peaceful night’s sleep.
For those who are taking withdrawals from their accounts to fund their current lifestyle, or who are getting close to that time, prudence dictates trimming some of the growth from the last few years and re-allocating it to less volatile investments. This way the money you need over the short term is protected from the vicissitudes of the markets, while the balance is still positioned to benefit from the long term growth potential of more the aggressive investments.
Even for those not withdrawing money, it is important to rebalance accounts. This “locks in” some of the growth from the investments and realigns the risk profile of the accounts which in many cases has become more aggressive than intended.
Although, we have been proactively making these changes in client accounts, each client’s goals, risk tolerance, tax situation, and resulting portfolio are different. You may feel that your personal situation has shifted or your tolerance for a decline in account value has changed. We welcome your questions and are always happy to speak with you about your specific situation, tolerance for an eventual stock market decline and the most appropriate approach to your investment accounts.
As always, we thank you for the trust you continue to place in us.
