Welcome to 2016
The market is off to a very rough start to 2016 – to say the least. As always when the market misbehaves, the pundits and doomsayers are out front fanning the flames of panic. This is all emotionally driven volatility and nothing more than a continuation of what we saw last summer. There is nothing that would indicate a shift in the US economy that would lead to cause for concern.
Here’s how we see it
- China is a mess. Most of you know how I feel about China and the “smoke and mirror” economic power they have become. The current mass exodus from the Chinese market is bringing down global markets (panic selling). Once the initial panic is over the capital leaving the Chinese market will need to go somewhere. This bodes well long-term for the US markets just as it did after the financial problems in Europe over the past few years.
- US economic data is good: Consumer confidence is at a high, auto sales have never been stronger (a huge deal), services data is strong in the U.S. (just released today), unemployment is at a decade low, the Fed raised interest rates (which is a huge deal because shows our economy is getting stronger)
- There have been 8 interest rate cycles since the 1950s. On average, the S&P 500 rose for 30 months after the first rate hike in each cycle. The shortest time period of stock price gains was 10 months. On average, one year after the first rate hike, the market was up 9.5%. Not to say history will repeat but that it’s usually a good sign when rates rise (initially)
- The risk of a recession remains low.
- There is a big difference between trading and investing. Unfortunately, the media and the markets are driven by the traders. Their short-term focus moves the market and causes those without a plan to panic and follow suit. In the minds of the herd, another 2008 is always around the corner.
Throw away the crystal ball
None of us can predict the movement of the markets – although the media is full of those that think they can. This is why we focus on the long term and on your financial plans. That’s what separates you from the herd. Do you have a plan?
Remember panic kills (your wallet.)
At times like these most people (and surprisingly many advisors) turn ostrich and stick their head in the sand waiting for the craziness to end. I think this is the perfect time to review your portfolio, financial products, and financial plan – no, they’re not the same thing – to see how they are performing.
Everything looks good when the market’s going up. The true measure of a plan is how it behaves under adversity.
Your New Year’s resolution
Have you been putting off reviewing your financial life? You’re not alone. Why not make it a priority in 2016?
If you have any questions, need some help, or would just like a second opinion, click the button on this page or just give me a call at the number above. I’m always here to help.
David J. Seibel is founder and Managing Partner of AGS Aurora Financial Services LLC (www.agsaurora.com), an independent financial advisory firm in Matawan, New Jersey. You may contact him by email at firstname.lastname@example.org.
Investment Advisory Services offered through Global Financial Private Capital, LLC a SEC Registered Investment Advisor