Should I Be Doing Something Differently?

This question has come up so many times the past few months and seems to correlate quite well with the recent uptick in market volatility. I figured this would be a good time to revisit the goal we set for ourselves and why we are investing in the first place. The market has been increasingly volatile in 2018 and it’s always good to take a step back, digest what’s going on, and plan for how to take action. As the old saying goes “look before you leap.”

Source: Twitter

Investors are right to question their advisors and actually I would advocate clients do question their advisors. As an advisor, your responsibility is to provide context and clarity on what’s going on in the markets and help maintain a plan for reaching your clients goals. Communication is the key in almost any area of life, and with wealth management, it is crucial. Volatile markets bring uncertainty, uncertainty brings concern, concern brings doubt, and doubt leads to distrust. Now, trust drives the entirety of a financial planner/client relationship so without it you are up a creek. Investors working with advisors should never have doubt, distrust, or concern with their financial advisor but rather a sounding board to help navigate turbulence and stay on track to reach their goals. So let’s take a minute to dive into what’s important.

February ended with most major equity markets down around 4-5%. The market then snapped back in late February and early March and then proceeded to retest our lows from February. Most reporters, publications, and news outlets blame concerns around rising inflation and interest rate concerns, but the true reason for any market volatility is always discovered in hindsight. Could it be a reversal from January’s large market run? A market correction? A recession? Algorithmic trading?


The honest answer is we don’t know. It could also be profit taking after a massively profitable 2017, re-positioning their portfolios for 2018 outlooks, or simply realizing gains with the recent Tax Cut and Jobs Act being passed. The markets are always noisy and the benefits are always reaped by those investors who eliminate the emotional response to the markets and keep their eye on the prize of (name any goal).

All investors, both professional and retail, look to anchor their concerns on some statistic, news article, or current event to help alleviate their frustration with the volatility. (Because it’s great to have someone to blame for our problems)

My thoughts: embrace the volatility. Each and every investor is saving and investing for a reason. A new car, their children’s education, their retirement, travel plans, a home, and a million other reasons. Rather than look to act based upon recent market activity, act upon what is needed to reach our goals. Everyone wants someone to blame for their portfolio volatility but the entire reason we are investing is to leverage the growth of the stock market over many years to help accelerate our probability of reaching our goals.

But Jack, what about tarrifs? Should I do something different based on the recent news? Again, noise. Unless your financial goals in life are to be a multinational goods trader or work in the import/export business, you really don’t need to let this distract your financial future. Most international policies, whether tax, tarrifs, or currency fluctiations, tend to work themselves out over time. We could debate all day around the short-term impact these will have on your portfolio but the goal is to deploy an investment strategy that matches your risk tolerance, investment time horizon, and is diligently monitored and managed to stay on that track. 

Source: JPMorgan Guide to Retirement – 2018

I want to leave you with a great piece from the 2018 JPMorgan Guide to Retirement. I really think this helps put things into perspective and gives us a great idea of where we should allocate our time. I will probably post another article in the future around time management as I see it being a crucial step to navigating into retirement. There are certain things we have control over and those are the areas of our planning we should take action with. Other areas, where we have no control, we need to limit our stress and focus as they do nothing more than blindside our chances for success. 

  • We have TOTAL CONTROL over our spending and savings strategies. If we feel we are insufficiently planned for retirement, let’s start with a checkup of your current cash flows.
  • We have TOTAL CONTROL over our asset allocation. If market volatility is a concern, don’t look to give up on our goals but rather revisit the risk tolerance we assigned for our investments. Should we adjust our risk tolerance based upon market volatility, I would highly advocate that conversation.
  • We have SOME CONTROL over our health and employment. We can exercise, eat well, and monitor our bodies. We can also choose how long we want to work and if we want to work into retirement.
  • We have NO CONTROL over stock market gyrations, politics, tax changes, or impacts to social benefits. There will be numerous politicians, talking heads, pundits, news outlets, and market commentators each and every day for the foreseeable future. Limiting your consumption of this will greatly improve your stress levels and help you focus on what’s really important, YOUR GOALS!

If you still want more about the markets, I would leave it at heartburn. With all the gains we consumed over 2016, 2017, and January of 2018, it’s only natural to see a period of cooling off. The markets ate so much over the past 12-24 months that a bit of indigestion was inevitable. 

To put this another way with a great quote I heard from Dr. David Kelly of JPMorgan, “The market’s are looked at as a glass half full for 2018, but that’s not a bad thing, especially after we have had 8 years of full glasses.”

Sources referenced:

  • JPMorgan – 2018 Guide to Retirement
  • Twitter – Carl Richards
  • – S&P500 stock chart
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