Good evening (2/5/2018, 11:37pm). The U.S. stock markets were down around
7% over the past two trading days. That's a sharp "pullback"
the likes of which we haven't seen in longer than usual, and I want to put it
into some perspective.
First, I am not worried about this so far, even if it
continues for a while longer. The market was running hot for many months
recently, and it was going to have to cool off at some point, and the economy
is pretty healthy overall.
Second, long-term investors should be patient, and
short-term investors are usually exposed much less to the stock market anyway.
Here is a link
to a post where I explain asset allocation, which is how I pursue the
optimal balance of various types of investments in order to manage portfolio
risk.
Some other thoughts I want to share:
·
Good economic data lately, no sense there will
be a U.S. economic recession soon.
·
Bear markets (extended downturns that drop 20%
or more from highs) are usually paired with economic recessions.
·
Pullbacks (5-10% declines from highs) are
expected during market cycles.
·
Corrections (10-20% declines) are rarer but
happen without necessarily indicating any major economic problem.
·
The FED is raising interest rates, but not too
much or too quickly in my opinion.
·
Long-term investors are almost always better-off
using a prudently-diversified portfolio and sticking with the asset allocation
strategy, as it is rare that investors (even professionals) "time the
market" effectively.
·
Here is a graphic offering some perspective on,
for example, the S&P 500 index from 1996-2011 (spoiler: probably best
to have just stayed invested instead of timing the market and missing several
Up days):
Stay tuned and I'll try to provide more insight.
Contact me with any questions about your accounts and asset
allocation/diversification.
Thank you.
--Gary
Garo
Linck Partoyan
Potomac
Wealth Strategies, LLC
1800
Diagonal Road, Suite 600
Alexandria,
Virginia 22314
