The markets have been volatile over the past couple of weeks. We are here to support your efforts to help clients maintain perspective and make sound decisions.
We have included the below talking points to help explain the recent volatility and answer questions clients might have.
What happened?
Over the past week, equity markets have declined as trade tensions escalated between China and the United States. Responding to inadequate progress, the U.S. announced that it would impose tariffs to an expanded group of Chinese imports. China, in retaliation, allowed its currency to fall to the lowest level in 10 years.
Are you concerned about this? Should I be?
We are always concerned about anything that affects our clients and their portfolios. We also know that it is important to maintain perspective. At midday on Wednesday, August 7th, the S&P 500 is down about 5% from all-time highs set just weeks ago. It is worth noting that this has happened before and very recently. In May, a previous bout of tariff saber-rattling between China and the U.S. resulted in a 6.6% decline that, at least then, was quickly regained. It is also helpful to take a longer perspective. Even with this most recent decline, the S&P is up 16.3% year-to-date. Of course, markets can move quickly and are subject to sharp gains and reversals, but for now the movement has been modest. The markets could go up or down from here. No one is smart enough to predict that, but we are smart enough to be prepared.
Why is the media making so much of this?
The media does not offer advice. They don’t know you or your finances. Their primary objective is to hold your attention, not to offer perspective. Last year, during a significant decline, a major media outlet declared that December 24th, 2018 was the “Worst Christmas Eve in History.” We believe that focusing on such a short timeframe is completely worthless. A more recent headline shows that the media focus on the extreme short-term is far from over; “Last week was the worst week of 2019.” What they didn’t say was that 2019, so far, has had such strong returns that any significant decline would be the worst.
Should we do something about it?
Yes, and we already have. As a planning firm, we design portfolios in anticipation of volatility – not in reaction to it. Your portfolio is carefully constructed with knowledge of your goals, your risk tolerance and your time-frame. If any of those has changed, we are here to talk.
*The S&P 500 consists of 500 stocks chosen for market size, liquidity and industry group representation. It is a market value weighted index with each stock’s weight in the index proportionate to its market value. https://money.cnn.com/data/markets/sandp/
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