Special Bulletin Regarding the Stock Market

While the Christmas holidays may provide us with many reasons for celebration, the precipitous volatility and decline of the stock market indexes is certainly not one of them. A typical 60/40 portfolio was down nearly 10% for the year as of Christmas, with much of that decrease occurring in December alone.  So please be forewarned that unless Wednesday’s dramatic rise in the market continues this week, opening your December statements won’t bring you much cheer.

Even if we accept that this has been one of the longest running bull markets and a correction is overdue, it is nonetheless painful, if not downright shocking in its severity and timing for the Christmas holiday. We may agree conceptually that a buy-and-hold investment strategy is optimal and that stocks will outperform other asset classes in the long run, but our emotions may tell us that somehow this market decline is different from past ones, and that we need to do something this time, because this is the one from which we won’t recover.

Fortunately, there is something concrete an investor can and should do to reassure him- or herself during a market downturn:

1.      Take comfort in the fact that you have established your investment portfolio with care and foresight. Many of you who are more vulnerable (close to retirement) and risk adverse have been gradually decreasing risk by increasing your bonds, rebalancing, and diversifying your investments. And those of you who have a longer time horizon and are less risk adverse, still have faithfully rebalanced your portfolios and made those counter-intuitive small purchases back into bonds, or into foreign positions. These actions make a difference! While decreasing risk doesn’t avoid portfolio losses, it does reduce their impact substantially.

2.      Become more familiar with the assumptions behind your retirement projection!  Christina and Barry have carefully and conservatively built your financial plan including market downturns, so that your goals remain on track even with the ups and downs in your investment returns.

It is not clear where we are in this bear market. Beginning?  End? Middle? We wish we could tell you the worst is over, but most likely the volatility will continue for some time. It would seem that uncertainty is driving this current decline, because the US economy still shows many strong fundamentals. Typically we know that it’s over once we are in the next phase of the economic cycle.

We would be happy to walk through those assumptions with you or respond to your investment concerns. Please call us (Christina: (614) 487-1244 or Barry at (740) 815-3969) or email us. We can talk or set up a time to meet in the next few days or weeks.

Sincerely,