Volatility in the Markets is Normal but Having Concerns About it is Normal Too

For many years now there has been unprecedentedly low volatility in domestic and foreign markets. The US Stock Market has been on a steady climb since the 2008 downturn and for months we have been seeing new record highs and for as many months, stock experts have been trying to gauge when the next market correction will be.

So, here we are. Long overdue for a market correction and staring in the face of it doesn’t feel all that comfortable. The memory of 2008 is still relatively fresh in investors’ minds and there is always that Recency Bias that can cause people to be spooked by drastic plunges on a day to day basis. That said, one of our responsibilities as an investment advisor is to help you put market news in its proper perspective.

As the media scrambles to explain the unexplainable – what is going on in the markets at the moment and how long it’s going to last—we thought we’d share a little headline of our own.

“The stock market is a giant distraction to the business of investing.”

This quote comes from Vanguard founder John Bogle in his 2007 classic investing book, “The Little Book of Common Sense Investing.”

These words are timeless, and some of the best words to keep in mind when considering your investments and how to respond to the uncertainty of the Stock Market. Bogle’s deeper explanation is that:

“The expectations market is about speculation. The real market is about investing. The only logical conclusion: the stock market is a giant distraction that causes investors to focus on transitory and volatile investment expectations rather than on what is really important – the gradual accumulation of the returns earned by corporate business.”

So, while we could indulge in incredible analyses of the latest economic news – Market swings, Trump’s tweets, The Fed possibly raising rates– we won’t. We don’t want to distract you from the real task at hand.

Your job is to remember that these are the very kinds of intrinsic events that our evidence-based strategy is meant to help you look past, so you can endeavor to achieve the kind of investment success that Bogle and countless others have described.

If the gloomy headlines worry you to the point that you are wondering whether you need to “do something,” we hope that the “something” will be to call us right away, so we can discuss what actions – or inactions – are in your best interest. Because we owe our clients a fiduciary duty to always serve their highest financial interests, it is both our desire and our legal obligation to advise you accordingly. We take that responsibility very seriously, so don’t hesitate to be in touch if you are second-guessing your investment decisions and remember the following:

  • Market drops are an expected, unavoidable part of investing.
  • Our advice is simple and straightforward: Stay calm and stay the course.
  • Remember why you’re investing. If you’re saving for a long-term goal, such as a retirement, your allocation already factors in a short-term market drop.

If you’re merely curious about the current market climate, we’d also be happy to have a personalized conversation with you, to answer any questions you may have. Even though we encourage you to not focus too heavily on the market’s daily activities, as financial professionals, we can’t help but find the intricacies a fascinating topic of conversation. (That probably explains why we’re such a big hit at light social gatherings.)

To sum up our stance on the current market conditions, we believe, if anything, it offers us a compelling lesson on just how arbitrary the market can be in the near-term. It’s why we emphasize taking a long-term, evidence-based view, to see your way through the years ahead. Academic studies have found that market timing costs about 1.56% in foregone returns per year!

“The stock market is a device for transferring money from the impatient to the patient.” – Warren Buffet, The Oracle of Omaha

Our job is to remind our clients to remember this is what you and we have prepared for together. Come what may, we’re here to help you stay on your way. Contact us at info@stuartfg.com