Head fake: noun
(In sports) An act of moving the head in such a way as to deceive an opponent as to one's intended direction or move.
Hannah told me it was time to write the March Blog and the topic we had planned was SPRING. The weather is giving us a head fake. In February, we had beautiful weather and temperatures in the high 70s. Spring was popping out all over, people were talking about planting their gardens and then BAM: rain, cold and frost. What is up with the weather?
The same can be said for the Stock Market. 2017 was a great year with the S&P 500 up over 20%, and it looked like it was going to just continue up. By January 26, the S&P 500 was up another 200 points to 2872.81, then it dropped over the next two weeks to 2581 only to rise and fall over the next month to where it is barely ahead for the year. Some people blamed it on our new Fed Chair Jerome Powell and most recently steel and aluminum tariffs.
Unpredictable is an understatement, head fake is apropos. All in all, the economy seems strong with low unemployment, inflation around 2% and earnings seems strong. Our political environment is creating market jitters, and investors are skittish. I have a pretty good sense that December 31, 2018 will be higher than January 1, 2018, setting aside natural disasters and terrorism. I am keeping a wary eye on the midterm elections. Senator Diane Feinstein was denied backing by the State Democratic Party as she runs for her fifth term at age 84. She has several top posts in the Senate that a brand new Senator from California will not have the opportunity to inherit. She talks about experience and her opponents talk about ‘out of touch.’
I bring all this up to suggest that we stay the course and not get deceived by the head fake. Investment management, financial plans and life plans are put in place for your success. Head fakes are about the other guys’ success. Don’t get sucked in. If something changes in your life, make adjustments. For example, if one of you loses a job or is injured and can’t go back to work, then it is a good reason and a good time to re-evaluate.
Another good rule of thumb is that the further away you are from needing the money, the less today’s headlines should matter. If you are retiring in 20 years, you will see 3 Presidents say stuff to upset the applecart. If you are already retired you may want to play a bit more conservatively. We have been looking at how long a lump sum of money will last with many clients. If the money is not going to deplete in their lifetime, then perhaps we can be more conservative with the investments. If you’d like to have that discussion, give us a call.
Make a good plan for yourself and stick to it!