Where we are today?
The last few days have left some investors feeling uneasy. We want you to know that it’s completely normal to feel this way. As your advisory council we have been prepared for this volatility and have been expecting this since the beginning of the year. We would like to take this moment to share with you that market volatility is normal and part of a changing market cycle. We expect 2018 to have much more ups and downs compared to what we have seen in the last decade.
We feel that your portfolio is well adjusted to your risk tolerance and has measures in place to reduce the volatility we are presently experiencing. Furthermore we feel confident that should the markets continue to move lower this will present significant buying opportunities. As always we are here to answer your questions and help you remain focused on your personalized financial plan.
What caused the recent market sell off?
We started 2018 on a very strong note. For the first time in over 10 years we had synchronized global growth meaning that almost every major economy was growing. You might be thinking how could this be an issue. The stock market is a forward looking indicator and is always concerned about what will happen next. The reality is that when all global economies are growing this leads to inflation. Inflation is something we see as “times are good” and the economy is expanding at a rapid rate. However too much inflation is a concern and it’s the number one priority of central bankers to keep inflation between 2-3%. One of the major ways the central bank controls the economy is via interest rates. The belief is that with rising interest rates you are now giving investors an alternative to stocks. Imagine getting a 4% dividend from your stock vs. getting a guaranteed 4% from a government bond? This alternative now has more people selling stocks than buying stocks which leads to increased volatility. Of course there are always more variables at play however this is what we feel is causing the recent market volatility.
Question & Answers
As your advisory council we understand that recent market headlines may have you wondering what all this means for your investments. Although we are not recommending any changes to your current holdings, we felt that the timing to comfort our clients was ideal. We can communicate this message either by e-mail, a phone call or through a review meeting.