How to Navigate Volatile Markets by Focusing on What We Can ControlSubmitted by Reby Advisors | Certified Financial Planners | Danbury, CT on October 19th, 2018
By Bob Reby, CFP®, October 19, 2018
This article appears in the Fall 2018 Newsletter.
As we approach mid-term elections in the U.S, I sense a nervousness by the many people I am fortunate enough to speak to. A nervousness about both Wall Street and our political leaders. This anxiety, if I am seeing it correctly, is present even though U.S. equity prices are at record highs, corporate profits are soaring, unemployment rates are at 30-year lows, and while interest rates are climbing, they are still competitively low (10-year Treasury at 3.25% today, the highest since 2011).
One way to help navigate through the noise in the press is to focus on facts. I’ll grant you that there are no facts about the future. However, there are plenty of facts about the past and the present. I didn’t invent the phrase, “this time it’s different” but I have heard it throughout my 33-year career. To lend some perspective, consider the following: There have been 12 economic recessions that have taken place over the past 75 years. Throughout all the turmoil, including 14 bear markets, 75 years ago the S&P closed at 12! Yes 12, and the earnings on the S&P 500 were 94 cents. Currently, with much of the year behind us, the S&P 500 is at approximately 2,900, and earnings look like they will come in at about $162 dollars, not cents. Unbelievable, by anyone’s account!
I realize that we have many challenges. For example, our inability, or lack of courage, to address social security and Medicare deficits, as well as rising debt as a percentage of GDP, among other things. I don’t have the answers as to how these issues can be solved, but we cannot kick them down the road too much longer.
What I do know is that creating a well thought out financial plan should not be influenced by the things we cannot control. We can control our behavior; how well we diversify our savings and withdrawal strategies and many other things. Let’s keep focusing on what we can control.
Wishing you all the best for you and your family,
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