After a tumultuous week with many ups and downs, markets regained ground to close in the black. For the week, the S&P 500 gained 0.91%, the Dow grew 1.11%, and the NASDAQ added 2.60%.
It's hard to watch your portfolio value fluctuate, especially when the money involved represents a lifetime of hard work and a comfortable future. If you're at or nearing retirement, you might be feeling especially emotional about market movements.
Right now, U.S. markets are experiencing a period of significant volatility with rapid selloffs followed by powerful rallies. High stock valuations and concerns about global economic growth are contributing to the swings in investor sentiment.
During volatile times, it is easy to get spooked and start questioning the logic behind your portfolio strategies. While it may seem tempting to pull out of the market and wait out the volatility, making investment decisions based on fear is usually the worst thing you can do. Behavioral economists have found that people feel the effect of market losses more than twice as powerfully as market gains. Losses hurt.
However, we can't have the possible gains without the losses. It's the nature of markets to move up and down, sometimes very rapidly. Trying to time markets is extremely difficult, and you're unlikely to get the result you want by jumping in and out of markets.
So, what can you do when markets swing?
Use your head, not your gut. It's natural to feel emotional about your hard-earned money. However, making emotional investing decisions can be very costly because you're likely to buy and sell at the wrong time, potentially locking in your losses and losing out on gains.
Take a step back. We know that it's hard to tune out the noise when media headlines scream that the sky is falling. Even when you know intellectually that pullbacks are normal, it's natural to worry about whether this time is different. However, we recommend that you focus on the big questions:
- Have your goals changed?
- Has your investment timeframe changed?
- Are your investments still in line with your goals?
Talk to us. If you are worried about how recent market movements may affect your personal situation, we want to hear from you. Before making any decisions, give us a call to discuss your personal situation.
Monday: Chicago PMI, Dallas Fed Mfg. Survey
Tuesday: Motor Vehicle Sales, PMI Manufacturing Index, ISM Mfg. Index, Construction Spending
Wednesday: ADP Employment Report, Productivity and Costs, Factory Orders, Beige Book
Thursday: International Trade, Jobless Claims, ISM Non-Mfg. Index, EIA Natural Gas Report, EIA Petroleum Status Report
Friday: Employment Situation
Notes: All index returns exclude reinvested dividends, and the 5-year and 10-year returns are annualized. Sources: Yahoo! Finance and Treasury.gov. International performance is represented by the MSCI EAFE Index. Corporate bond performance is represented by the DJCBP. Past performance is no guarantee of future results. Indices are unmanaged and cannot be invested into directly.
Q2 GDP growth surprises. The second estimate of second-quarter Real Gross Domestic Product growth surprised by coming in at 3.7%. The first estimate showed 2.3% growth after 0.6% growth in the first quarter.
Consumer sentiment falls in August. A measure of consumer optimism about the economy fell this month, reaching the lowest level since May. However, economists still believe personal spending is on track.
Oil prices bounce back. Global oil prices experienced their biggest one-day rally since 2009 on Thursday. Prices rose on the back of stronger-than-expected GDP data, a pipeline outage in Nigeria, and higher equity markets.
Consumer spending rises in July. Rising wages led to a healthy increase in consumer spending, which rose 0.3% last month. Americans also stepped up their savings rate.
These are the views of 4th River Financial Group, and not necessarily those of the named representative, and should not be construed as investment advice. Neither the named representative nor the Investment Advisor gives tax or legal advice. All information is believed to be from reliable sources; however, we make no representation as to its completeness or accuracy. Please consult your financial advisor for further information.
Investing involves risk including the potential loss of principal. No investment strategy can guarantee a profit or protect against loss in periods of declining values.
Diversification does not guarantee profit nor is it guaranteed to protect assets.
The Standard & Poor's 500 (S&P 500) is an unmanaged group of securities considered to be representative of the stock market in general.
The Dow Jones Industrial Average is a price-weighted average of 30 significant stocks traded on the New York Stock Exchange and the NASDAQ. The DJIA was invented by Charles Dow back in 1896.
The Nasdaq Composite is an index of the common stocks and similar securities listed on the NASDAQ stock market and is considered a broad indicator of the performance of stocks of technology companies and growth companies.
The MSCI EAFE Index was created by Morgan Stanley Capital International (MSCI) that serves as a benchmark of the performance in major international equity markets as represented by 21 major MSCI indexes from Europe, Australia and Southeast Asia.
The Dow Jones Corporate Bond Index is a 96-bond index designed to represent the market performance, on a total-return basis, of investment-grade bonds issued by leading U.S. companies. Bonds are equally weighted by maturity cell, industry sector, and the overall index.
The S&P/Case-Shiller Home Price Indices are the leading measures of U.S. residential real estate prices, tracking changes in the value of residential real estate. The index is made up of measures of real estate prices in 20 cities and weighted to produce the index.
The 10-year Treasury Note represents debt owed by the United States Treasury to the public. Since the U.S. Government is seen as a risk-free borrower, investors use the 10-year Treasury Note as a benchmark for the long-term bond market.
Opinions expressed are subject to change without notice and are not intended as investment advice or to predict future performance.
Past performance does not guarantee future results.
You cannot invest directly in an index.
Consult your financial professional before making any investment decision.
Fixed income investments are subject to various risks including changes in interest rates, credit quality, inflation risk, market valuations, prepayments, corporate events, tax ramifications and other factors.
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