If you’re a Pinnacle client, I have some very good news for you. I’ll get to that in a moment, but first, I want to share a few observations about recent market activity…
Based on the current status of the markets as related by the media, are investors entitled to be anxious? Nervous? Frightened? Of course they are. As human beings we are not immune to these emotions. I have often written that the notion that investors can act like automatons, suppressing all emotion in volatile and dangerous markets, is a fairy tale. In my thirty-five years of experience, the best you can do—with the benefit of significant training—is to recognize your emotions and try to lean against them when making investment decisions.
There are several forces at play that make market volatility seem more frightening than it did “in the old days,” no matter what the old-timers might say. Today’s instant communications give us real time reports of market declines as they occur, with alarms sounding on our smart phones. Remember when you used to get the bad news on the radio or the evening news, edited with perspective and put in context? Business and popular media helps to fuel panic as they (the “experts”) speculate just how bad things are likely to get, while you helplessly watch the next downtick in stock prices at the bottom of your television or computer screen. Electronic trading creates dizzying, and sometimes frightening, intraday changes in prices that seem out of alignment with the news of the day. And the fact that the Dow Jones Industrial Average is valued at a price close to 24,000 means that an insignificant two-percent price decline becomes a headline grabbing 480-point wipe-out! Scale that down by a factor of ten to 2400 (as it was in 1987) and that two percent drop doesn’t look so scary.
Consider that after nine years of what has been one of the longest bull markets in history, we are simply less prepared to digest market volatility. Many investors have created significant wealth since the 2009 market bottom, and barely remember the last financial crisis, not to mention the dot-com debacle that occurred in 2000-2001. But now, despite their best intentions, they find themselves thinking about market news during the day and how it could impact their retirement or other plans. What if prices don’t make a new high this time around? What if this is the beginning of the end?
On that note, I have good news for you if you happen to be a Pinnacle client. It is highly likely that your portfolio with Pinnacle is balanced with a variety of different asset classes, many of which are less volatile than the stocks that you hear about every day. Your portfolio returns should be almost soothing relative to the breathless ups and downs of stock market headlines. It is also notable that Pinnacle clients have their financial plans crafted with market volatility in mind, and should take comfort that even though any particular news cycle can be nerve wracking, they’ve already made the portfolio policy decisions that will ultimately serve them well throughout a full market cycle of very good—and very bad—market performance.
And finally, Pinnacle clients are working with experienced financial professionals who have managed money, and offered professional financial planning advice, through some of the worst market environments in history. Yes, somewhere along the line, many of us have actually become the “old timers” I mentioned earlier.
At Pinnacle, we understand how you feel when markets turn violently lower, or higher, and we can help you to keep it all in the proper perspective of a well-crafted financial plan. After all, that’s our job.
Disclosures
Pinnacle Advisory Group, Inc. is a registered investment advisor. Past performance is no guarantee of future returns. Investing involves risk and possible loss of principal capital.
The views and opinions expressed in this content are as of the date of the posting, are subject to change based on market and other conditions. This content contains certain statements that may be deemed forward-looking statements. Please note that any such statements are not guarantees of any future performance and actual results or developments may differ materially from those projected
Please note that nothing in this content should be construed as an offer to sell or the solicitation of an offer to purchase an interest in any security or separate account. Nothing is intended to be, and you should not consider anything to be, investment, accounting, tax or legal advice. If you would like accounting, tax or legal advice, you should consult with your own accountants, or attorneys regarding your individual circumstances and needs. No advice may be rendered by Pinnacle Advisory Group, Inc. unless a client service agreement is in place.
