"The Sky is Falling, The Sky is Falling!”

| November 12, 2018
Share |

In this classic children’s story, “Chicken Little” had an acorn fall on his head and immediately assumed that the sky was falling, boding the end of the world. As in the story, in Chicken Little’s quest, he was able to enlist many other characters along the way eager to buy into the hysteria. It seems easy to follow “Chicken Little” in buying into the fear and dread that a declining market may bring.

In a sudden reversal of fortunes, the market has seen dramatic numerical losses since the beginning of October. Although, we all know, intellectually, that at some point, “what goes up, must come down”, emotionally, there always seems to be a rude awakening or an element of shock when the stock market takes a “breather” and there is a period of profit-taking or decline.

Frankly, we have been waiting for a market decline since it became difficult to rationalize buying in at market highs. We had been setting limit orders to buy at more reasonable prices and money had been accumulating pending the entry points that we were hoping to find. Along with patience, it was still prudent for us to adjust pricing to where we felt we may be able to buy and not risk the opportunity of being invested.

Although, we wish we were perfect in being able to time the very bottom of the market, we feel that it is still worthwhile buying positions and sectors that have seen their prices fall yet are still fundamentally sound investments. In the last week, we have seen declines in energy, industrials, health care and technology. While we still may be leery of some areas, some of these sectors which also include the resilient defense stocks and technology favorites may be “prime for the picking.”

For now, while there is uncertainty relative to the economy, interest rates and the global trade policy that is coming from Washington, D.C., these concerns are for the moment or, at best, for the near-term. Longer term the market is about capitalism and having ownership in companies that are fundamentally sound, well-managed, historically have solid earnings and pay dividends to their investors in addition to the potential for companies that are able to obtain growth and capital appreciation. Aside from these potential benefits is the reality that other asset classes don’t typically keep pace with the long term nemesis of inflation.

I would ask that “sound minds prevail” and that we take a reasonable and practical outlook to investing for the long term and by following the characteristics that have been the cornerstones of wise investment. Patience, diversification and discipline have delivered success to investors for as long as there have been markets. For those that have retirement plans such as 401(k)’s these are the drivers of success. It is key that your portfolio be managed in a way that personally suits your situation relative to risk tolerance, income or liquidity needs. In this environment, it becomes hugely apparent that experience and certifications matter. I have seen the market crashes dating back to 1987 while many of the advisors today haven’t seen any market corrections or don't work within a team of seasoned professionals. 

Our highly committed staff at RZ Wealth is working to call or email all of our clients to stay in touch and to make sure that we are up-to-date on our information and then determine if the allocations that we have for you are in consideration of your risk tolerance, financial objectives and goals. There is risk in all areas of investment as there is risk in not investing due to not being able to outpace the cost of living in very conservative investments and therefore running out of money. With this in mind, it is imperative that the asset allocation relative to stocks, bonds and cash are based in the reality of your spending needs and objectives and forecasted to last as long as you do to avoid the nemesis of “longevity risk”, or outliving your assets. Please expect to hear from my office in the coming weeks to touch base with you, answer any questions and to update the information that we have in regard to your current situation and needs. As always, your trust and faith in us is immeasurably appreciated and we will continue to do our best to serve you today and in the years to come.

Have a question about this topic? Contact us today. 

Share |