The Current Market Decline in Context

US Stock Rout Fuels ‘Bear Market’ Chatter

The Current Market Decline in Context

Stocks on Wall Street are continuing to sink, tipping major US equity indexes into 10 per cent corrections from recent peaks and forcing anxious investors to contemplate the possibility of a deeper bear market (The Financial Review).

If Metis Ireland has been doing our job as your Financial Planners, you might already be able to guess what our take is on current market news: Unless your personal goals have changed, stay the course according to your Metis Lifeplan – #StickWithThePlan.

Still it never hurts to repeat this steadfast advice during periodic market downturns. We understand that thinking about scary markets isn’t the same as experiencing them.

So, what’s going on? Why did U.S. stock prices suddenly drop to set off the alarms?

As Financial Planning guest columnist Kimberly Foss, CFP® described: “To understand the anxiety that led to many investors rushing to sell last week, you need to follow some tortuous logic. … If American workers are getting paid more, then companies will start charging more for whatever they produce or do, which might boost inflation. ‘Might’ is the operative word.”

“Good news, it seems, is bad news again,” this Wall Street Journal columnist added.

While these opinions may suggest the catalyst for the current drop, they do not inform us of what will happen next. Sometimes, market setbacks are over and forgotten in days. Other times, they more sorely test your resolve with their length and severity. At Metis Ireland we don’t know how current events will play out because we can’t predict the future (no one can), but we do know this:

1.      If you try to time your optimal market exit and entry points, you’ll have to be correct twice to expect to come out ahead; you must get out and back in at the right times. Every trade, whether it works or not, costs real money. “Investors trying to trade in the short-term-driven market needed to increase their risk tolerance and be willing, and able, to lose”, Jay Jacobs, vice president and head of research at Global X Funds.

1.      Capital markets have exhibited an upward trajectory over the long-term, yielding positive, inflation-beating returns to those who have stayed put for the ride. “If you’re a long-term investor, you can look at this recent pullback as an opportunity simply because valuations look more attractive now,” Jay Jacobs.

So, you need to be wary of the media noise and headlines to get attention such as “the biggest plunge since …”  While the numbers may be technically accurate, they are framed to frighten rather than enlighten you, grabbing your attention at the expense of the more boring news on how to simply remain a successful, long-term investor.

Instead of worrying over meaningless milestones or trying to second-guess what U.S. economics or a Donald Trump tweet might do to stocks, bonds and inflation, we believe the more important point is this:

Market corrections are normal – and essential to generating expected long-term returns. #StickWithThePlan

In summary, before you consider changing course if the markets continue to decline, talk to one of our team at Metis Ireland about a personal Metis LifePlan.

Keith Matthews
Financial Adviser

Disclaimer

Metis Ireland Financial Planning Ltd t/a Metis Ireland is regulated by the Central Bank of Ireland.

All content provided in these blog posts is intended for information purposes only and should not be interpreted as financial advice. You should always engage the services of a fully qualified independent financial adviser before entering any financial contract. Metis Ireland Financial Planning Ltd t/a Metis Ireland will not be held responsible for any actions taken as a result of reading these blog posts.