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Recent Market Volatility Prompts a Look at the Bigger Picture
The month of Halloween was especially scary for many investors in stocks. In October, the Dow Jones Industrial Average and the Standard & Poor’s 500 gave back almost all their gains from the previous nine months of the year. In addition, there was a level of volatility that spooked many investors, especially considering the lack of volatility in the recent months.
So far in November, there has been some recovery. But many investors remain nervous. At times like this, it can help to take a look at what we know and what we don’t know.
First, the positive indications are:
Not all the news is good, though:
- Job growth is good. That suggests that companies are hiring in the expectation that they will need more employees.
- Corporate earnings are good. In the end, corporate earnings are one of the most powerful drivers of stock prices.
- Consumer confidence is at its highest level since 2000. This is especially important because so much of U.S. economic growth is driven by consumer spending and, historically, confident consumers spend more.
- Inflation is holding steady after some interest rate increases by the Federal Reserve. The markets were made jittery by the rate hikes because rising interest rates make it more expensive for individuals and companies to borrow money. But the adjustments seem to be working, at least for now.
In addition to what’s going on right now in the economy, there are things we know from watching markets over time. For example, over time stocks have provided significantly higher long-term returns than have either bonds or cash. But there is no guarantee that will continue. And if you should need your money during a short-term market downfall, you probably don’t care much about stock performance since 1926.
- Global growth is slowing. In addition, the value of the dollar is high compared with many other currencies, which makes U.S. goods more expensive abroad.
- Home sales are slowing down, as are mortgage refinances and housing starts. In addition, if interest rates continue to rise, that would make mortgages more costly and could further suppress the housing market.
- The federal government has a higher-than-normal deficit as a percentage of the GDP. That means that the interest payment is high – and could get higher if interest rates rise further.
- There is considerable uncertainty about the effect of tariffs that the U.S. has imposed on materials and goods from other countries, especially if those countries retaliate by increasing their tariffs.
At The Bensman Group, we believe that as an investor, you need to decide on a strategy that considers your age and financial situation, financial obligations and feelings about risk. Then you should have a portfolio that helps you to execute that strategy. And you should revisit your portfolio from time to time to ensure that you still have the same investing goals and that your portfolio is still helping you to achieve them.
Whenever you are concerned about your investments, we are happy to talk with you about your needs, your worries and your plans. We believe that the importance of investing is to help you achieve the kind of life you want for yourself and the people you love – while still allowing you to sleep at night.
If you would like to discuss your wealth management needs, contact us at firstname.lastname@example.org or 847-572-0808.