And just like that, we’re wondering if it’s finally here. We’ve been talking about the next big market decline for so long now, it’s begun to feel like crying wolf. Ten years removed from the last recession, we’re due, painfully so. The last two days the market (‘the Dow’) has declined over 1,300 points. That amounts to roughly 5%, almost instantly. All market gains (not counting dividend income) most investors have seen year-to-date just vanished in two days.
I don’t enjoy this. It’s normal and necessary but I don’t enjoy it any more than you do. When you’re nearing retirement, this can be especially nerve-wracking. With a big enough decline, will your retirement be delayed? If you’re already retired, does this mean it’s time to find that old resume and freshen it up? The only people who should enjoy this are young people who have a lot of time left to invest and will benefit from investments going on sale. The irony though, is that these folks don’t often have the experience to know this is what the market does. As a result, they’ll see a big decline as a reason to just stay away from investing altogether.
Back to you. How are you feeling right now? How does this meaningful drop in the stock market affect you? Whatever you’re feeling, please know that it’s okay to feel that way. Your experience, your personality, and your worldview inform how you feel and you shouldn’t feel badly for feeling that way. That said, this is a reminder that a strategy should take precedence over feelings. A well-built retirement plan will include provisions for a meaningful market decline, therefore, ask yourself if you’re confident in the plan that you’re following. If not, skip ahead and hit ‘reply’ to this email. Let’s talk it out. If you feel great about your plan (in spite of not enjoying the decline) then you may be all set.
I’ve quoted him before, but I’ll do it again because the quote is awesome. Heavyweight fighter, Mike Tyson, is quoted as saying that “Everyone has a plan until they get punched in the face.” C’mon, is there a better quote than that? The market may be punching us in the face right now; how’s that plan looking?
The market, which is made up of millions of investors, is responding to: rising interest rates which make it more expensive for companies to borrow money to grow, the trade war that the president has been waging with other countries such as China which will make competition more challenging for many businesses, and a general sense that many companies simply cannot grow fast enough to meet analysts’ expectations. This storm has consequences for investors. Only time will tell how it all plays out.
As we’ve said before, losing sleep over worry isn’t a strategy. Jumping out of the market isn’t a strategy either. A strategy is a comprehensive plan that includes proper investment diversification, product diversification, a written income plan, tax strategy, and an estate plan. If you lack any of these, reply to this email or call us. We’d love to help ease your mind by revisiting your strategy and freshening up your plan.
We can’t control the market’s anger, but we can control our response to it. That’s what planning does. Let us help.
All the best,
Adam Cufr, RICP®