Until about a month ago things were going pretty well in the stock markets, but not so well in the bond markets. Let’s talk about bonds first. Interest rates have been going up and the bond you held last month is worth less than it was a month ago because it doesn’t earn as much as bonds offered today. The stock markets are harder to understand, and a long list of causes have been given lately. They include:
- Fears that the Fed is going to raise interest rates too fast and put the economy into a recession.
- Fears that we are going to get into a trade war with China, Canada, Mexico, or Europe. Fortunately, we are really down to just China and early news is the meeting with China went well. Look to this to go back and forth a few more times.
- Concerns that we’ve had a really good run with the stock market and it is coming to an end.
- The yield curve just inverted which is usually an indication that a recession is on the way
- Concerns that countries like Italy could be headed to a recession and their government may not be able to agree on a solution. Frankly, there is a concern all over the globe that politics has gotten more extreme and voters are getting tired of the status quo and embracing more extreme views. (Ward, 2018)
These are some of the more popular themes and mostly they are about fear. Fear of the unknown. Fear of what might happen. I am not saying we shouldn’t be concerned about the above. We should. They just shouldn’t be influencing our decisions and they do because we are human. I am not sure how we will finish the year. I suspect stocks will be a little higher and bonds will be a little lower. This is the part where I tell you to stay the course, show you statistics about those who missed the best days of the market, etc. I am not going to say any of that. Here is what I will say. If you are going to need the money in your investment accounts in the next 6-18 months, then most of what you have should be fairly liquid and probably not in technology stocks. If your timeframe is for more than 18 months, you should stay invested. That doesn’t mean you shouldn’t make adjustments. If this month has put a knot in your stomach, we should talk because the fluctuation in the markets is probably not over and a good night’s sleep is more important right now than getting every bit of return out of the market. Can we make adjustments? Absolutely. Should we go to cash? Only if you need the money in your investment accounts for a new roof or to send your children to college in the next 6 to 18 months.
We welcome the opportunity to meet with you and discuss any of the above and how it affects you. If someone you know is losing sleep and you think they could benefit from a conversation with us, by all means, let them know we care, and we listen.
The information provided is for guidance and informational purposes only. The articles are not the opinions of ProCore Advisors, LLC.
Sources:
https://www.vox.com/2018/10/29/18037564/jair-bolsonaro-brazil-angela-merkel-germany-populism
