You know it is coming, don’t you? A lot of clients I speak to lately have hinted to me or outright told me that they are scared. I think that is absolutely normal. In fact, this year alone, the markets went down 11% in January, back up again in February and have generally been up and down all year.
With cash paying nothing, bonds paying very little and the stock market up in the low single digits this year, I get why people might be worried about interest rates, the Presidential election, China, Europe, terrorism, and apparently, Brad and Angelina now, too.
Aside from all that, markets have generally been on the rise now since March 2009. This qualifies as the second longest bull run, ever. So, what goes up, must come down, right? Maybe.
I like to listen to Commonwealth Financial's Chief Investment Officer, Brad McMillan. He has a great blog himself, called the is that the "Independent Market Observer" he has some very good thoughts on this subject lately. The depth of the crash was so total in 2008 that there is still slack to be made tight. Homes are just now reaching back to their pre-crash prices. Markets are too.
Of course, there is a litany of things to inspire worry. What will Trunp be like as President? What if China dumps treasuries? Lots of what ifs.
all of this is stuff out of our control. However, we have planned for the best and prepared your portfolios for the worst. If markets decline, you will see the values of your accounts go down. It is one thing I can guarantee. But the worst thing we can do is panic at that point because our portfolios are built for the long term.
We spent a lot of time in 2014 reconfiguring our models. With the anticipation of a decline in mind. And as I write, I’m putting them through some more tests. I’m trying to design a portfolio that will only go down 50% of market loss in a down year but capture 60-75% of market upside years. It isn’t easy!
That little statistic there is what data tells us is the best for long-term results. That and not selling in panic when markets drop.
Another thing I can guarantee – a market decline will visit us in the near future. I don’t know when. December? January? No one knows. I just know it will come. And when it does, I want you to know we’ve worked to protect the portfolios. I will want your calls when it happens so we can work through the tough times together.