Here we are nearing the last quarter of 2019 and there is no lack of things for capital markets to be upset about. Whether it is trade tensions with China, an inverted yield curve, or the markets reacting to the latest tweet from our POTUS, I find myself fielding the same question from both existing and prospective clients. “What does the future hold?” (or some form of that). Unfortunately, my crystal ball is broken but my answer these days boils down to this: volatility.
You see, if there is one thing that capital markets don’t like, it’s uncertainty; and we certainly aren’t lacking any of that right now. For the most part, this uncertainty is the result of a lot of noise from the media, friends, colleagues, etc. Recently we’ve seen the impact that this noise can create on an investment portfolio. The table below outlines the monthly and year-to-date performance* for the S&P 500 so far this year(1).
Around May 2019 is when most folks started getting nervous again. With the end of 2018 not far in the rear-view mirror, a lot of investors were wondering if we were facing another correction; meanwhile, the S&P 500 was still near double-digit returns for the year. Times of volatility can make investing a very emotional experience, and making investment decisions based on emotions rarely works out in the long run.
One of the most important responsibilities a financial advisor has to their clients is to cancel out the noise and assess risk tolerance. As an advisor, I have the ability to take emotion out of the decision making process when it comes to managing money for my clients. Warren Buffet put it this way: "The stock market is a device for transferring money from the impatient to the patient.". If your risk tolerance aligns with your market exposure then the best thing to do is to be patient. If you are uncomfortable with the volatility you see in your investment portfolio then it may be time to talk about your risk tolerance with your advisor.
At the end of the day the capital markets will always bring volatility. If there was no risk, there would be no reward. Regardless of what is happening politically, socially, or economically, volatility is the price of admission for investing in capital markets. This is why it is imperative when you do investing of any kind, that you are doing it with a purpose and a philosophy; that you understand your tolerance for market risk, and ultimately that you are comfortable enough to be patient in times of uncertainty.
This commentary on this website reflects the personal opinions, viewpoints and analyses of the Financial Strategies Group, Inc employees providing such comments, and should not be regarded as a description of advisory services provided by Financial Strategies Group, Inc or performance returns of any Financial Strategies Group, Inc Investments client. The views reflected in the commentary are subject to change at any time without notice. Nothing on this website constitutes investment advice, performance data or any recommendation that any particular security, portfolio of securities, transaction or investment strategy is suitable for any specific person. Any mention of a particular security and related performance data is not a recommendation to buy or sell that security. Financial Strategies Group, Inc manages its clients’ accounts using a variety of investment techniques and strategies, which are not necessarily discussed in the commentary. Investments in securities involve the risk of loss. Past performance is no guarantee of future results.
* ”monthly and year-to-date performance” - There may be some variance in performance numbers due to holidays and weekends, and opening/closing price of the dates indicated.
This article is written by Justin Meyer.