Welcome to the season of “fear” when it comes to the stock market and the relationship around growth for your portfolio.
Normally, the 3rd quarter is the most volatile period of the calendar year; this is to say in a normal year. The stock market swings are built from predictable things, like the monthly housing report, unemployment rates, and consumer reports. Also, normally, major hitters on today’s S&P 500 will come out with their predictions and actual results of earnings. These normal patterns help control the stock price of most of your major investments. However, there are some factors that may not make sense to where the Dow stands today.
Let’s discuss a few actions that generally lead to this volatility in the stock market.
- Those in direct control of the interest rates, the FED, meet formally in September each year to discuss the future outlook of rates and changes that will need to be made. Many of us feel the effects of inflation, and big decisions with even larger consequences to fail may exist in these necessary changes.
- In September, the Social Security Trust Board meets about the projection of a SS pay raise or increase in the next year’s Medicare premium. Speculation will scare or excite the market on this.
- End of the summer…that’s right. The end of the summer still marks the end of the “honeymoon period” for the stock market. Many companies’ budgets and projections are built on a fiscal year that will start at the end of the 3rd
- Oh, and it is a major election year too. The “changing of the guard” in our nation’s largest chair can directly or indirectly affect the sentiment of investors. The swing of power will mean a change to fiscal policy across the board.
What do we do?
Let us start by assessing why we use these types of “stress driving investments” to save. Historically speaking, the stock market has 8 out of 10 years with positive performance. The average Bear market since 1950 has lasted 18 months, while the average Bull market has lasted 54 months. The growth period is thus triple the loss time frame. When we are in the investing stage in our 20s, 30s, and 40s, we recognize that a lower number on the statement is not such a big deal now.
When we are in our 50s, 60s, and 70s, this drop could be the difference between having enough for the long haul.
We are told words like diversification, but have we really considered this in the good times and the bad. Let’s pause for a second, would you gamble your rent check or your mortgage?
Would you risk your paycheck to affect buying groceries this week?
Would you take a chance on putting gas in your car?
There is no better time than the next couple of months to schedule a meeting with your financial advisor. Consider the “risk” in saving with your time frames of need. In reality, you may just need to re-evaluate what diversification models are best for you.
Give us a call. We are happy to assist you!
Blessings!
Dan