Friday, October 7, 2016

Are The Financial Markets Preparing For A Big Move?

The financial markets have seen a considerable move to the upside since recovering from the initial shock of Britain voting to leave the EU earlier this year. While every analyst and financial guru is trying to call the top I think they're ignoring the silent giant. Both the S&P and Dow Jones indexes have become eerily stable over the past few weeks now with very little movement in either direction. The term used to describe this type of price action is "coiling". The markets seem to be coiling up for what has the potential to be a very significant move but the question that remains to be answered is in what direction will that move be? Logic tells us that 7 years into a bull run with markets sitting at all-time highs that move should be to pull back. Unfortunately, logic doesn't always prevail and that truism can be especially accurate when being applied to financial markets. My belief is that corporate earnings and low interest rates are the only factors that can continue to push our markets higher if that's the direction the move inevitably ends up being. Whereas there is a plethora of reasons for why this market could correct; terrorist attacks, the presidential race, fallout from Brexit, uncertainty in foreign markets, among countless other reasons.
So what do you do as an investor? Where do you go for returns on your money? I've noticed a disheartening trend among retail investors lately in that they're taking on undue risk for returns that are less than satisfactory. In baseball they often tell a batter not to chase after a bad pitch, but instead to wait for the right pitch to come to you. I like that analogy as it relates to our current market state. Don't go out chasing after high risk investments that are yielding average returns. Instead, find a safer play to hold onto for the interim while we sit at these all-time highs and watch how everything unfolds. There's no penalty in taking a little risk out of your portfolio but there can be grave penalties for people pursuing undue risk when the market decides it's time to pullback and correct. 
Don't let the fact that your IRA, 401k, or brokerage account is at the highest it's ever been blind you from realizing now is as good a time as ever to reach out to your advisor and reevaluate your situation. Cross all the t's and dot all the i's because you can always put a little more money to work if the general trend turns positive, but once the trend goes against you and your account values fall there's nothing you can do to recover those lost assets. I started the process of placing clients into lower risk alternatives weeks ago to ensure they don't bear the brunt of a potential sell off. Something to certainly consider for yourself if you feel that your accounts may be overextended or facing unnecessary risk.
I wish, like everyone else I'm sure, that the markets could continue in a straight line upward but we all know that's not realistic. By no means am I out here preaching impending doom. I just hope people are aware of where we are and prepared for the different outcomes we could face going forward. Do yourself a favor and don't roll the dice when it comes to your hard earned money; speak with a professional and ensure that your investments are ready for anything that may lie ahead. Thanks for stopping by and I wish you good luck in all your current and future investing.

Invest Long & Prosper

Disclaimer: The views expressed are not necessarily the opinion of Woodbury Financial Services Inc, and should not be construed directly or indirectly, as an offer to buy or sell any securities mentioned herein. Individual circumstances vary. Investing is subject to risks including loss of principal invested. No strategy can assure a profit against loss.

No comments:

Post a Comment