Market Ups and Downs
By: David Smyth, October 2, 2014
Over the last month of third-quarter meetings with client families, the most common question I’m hearing (albeit in a roundabout way) is, “When will the market crash?” The answer is, I have no clue. But before this becomes the shortest-ever thoughts from David, let me humor you.
Since the market bottomed out in the early part of 2009, things have been trending upward despite the lack of any significant economic improvements. This is due in large part to the Federal Reserve’s interest rate policy, but that economic stimulus package is likely to be finished and interest rates raised in 2015. Many are concerned that this will not go well, as the consensus is that we have become too dependent on the Fed’s stimulus policy.
Another trend I’ve noticed from clients is that many are asking about initial public offerings (IPOs). We’ve seen a record number of IPOs come into the market since the last crash, and many people want to know what I think about them, or if their value is about to double. Again, I don’t know. What I do know is this: The recent interest in IPOs reminds me of a day back in the summer of 2011 when nine clients called – yes, all in one day – wanting to buy gold, as it was headed for $3,000 an ounce. Well, Google any gold chart and you’ll see that that was the top. I also know that that was not the top of the stock market.
What I’m seeing now with IPOs is similar to what happened with gold. Think of it this way: Companies don’t sell their shares to the public unless they’re able to do so at a premium price.
So what to do, you’re wondering? As many of you have heard me say, first, stop taking to heart the sensationalized financial headlines that are all over the news. Whether it’s celebrity gossip or stock market analysis, headlines are meant to shock you into clicking the link or reading more on the next page where they’ve strategically placed that flashy ad. So put down the paper, close that website and take a deep breath. You can’t get emotionally involved. Each and every day, we are monitoring your portfolio and making sure your investments match your risk tolerance. We know you’re worried about your nest egg, and we appreciate that. Many of you are planning 20- to 35-year retirements and your money needs to last. If we determine that one of these news items actually does warrant a change in your portfolio, you’ll hear from us. I promise.
Does this mean your portfolio will only go up? Of course not. There’s always volatility and fluctuation in the market. But we want you to know we’re always keeping your best interests top of mind. Still have questions or concerns? We’ll be happy to sit down and chat. Also, if you hear someone else expressing these fears or concerns, feel free to pass on this newsletter. Perhaps we can help their situation too.