Adam R. Schaffer, AWMA®
Investment Operations Manager, Portfolio Manager
If you were to look back at the stock market for the year 2017, you might be surprised to find that it was one of the calmest years in terms of volatility on record. Just eight of the 251 trading days throughout the entire year provided a move of more than +/- 1%, as measured by the S&P 500 index. For historical context, there have only been two other years since 1928 with even fewer +/-1% days, 1963 and 1964.
Fast forward through the first half of 2018 and you may have noticed a stock market that has done its best to make up for some of the calm of 2017. We are only a little more than halfway through 2018 and the S&P 500 index has already endured twenty-four +/- 1% days, three times the number for all of 2017! Volatile market environments provide investors with a good reminder that market fluctuations day to day are more normal than we might realize; especially as recent fears over rising interest rates, trade wars, and swings in oil/energy prices have consumed the traditional and social media headlines that grab our attention on a regular basis.
Often, our natural reaction to these headlines and the corresponding changes in our personal investment portfolios is an impulsive feeling that something needs to be done in response. Certainly, changes in corporate tax rates, interest rates, and trade agreements may dictate changes in individual holdings. But rather than making changes to your overall portfolio allocation as an emotional response to current market conditions, it is more beneficial to meet with your advisor: clarify your risk tolerance, discuss your investment time horizon, review any upcoming cash needs, and make sure your advisor is aware of any other relevant financial or estate planning needs that may affect your long-term financial plan.
For example, investors that remained patient and maintained their exposure to stocks appropriate for their long-term plan during the last bear market, when the S&P 500 index saw periods averaging +/- 4% moves daily, were significantly rewarded for sticking to their financial plan.
At Buckingham, we focus on communicating effectively so that we can help our clients arrive at the most appropriate long-term asset allocation. When you establish a sound financial plan you gain the confidence to avoid emotional market timing strategies that have low probability of success and high probability of above average risk when investing for your future. We welcome the opportunity to help you achieve your financial goals through all market environments.