Where Do We Go From Here?
By: Duane J. Silbernagel
If you have been following the stock market closely over the past few weeks, you may feel as if you were on a roller coaster at times. As of September 3, 2015 most major indices had given back all or a large portion of their 2015 gains.
There have been various reasons for the latest fluctuations. Recent questions surrounding slower growth in China’s economy, the second largest in the world, have led to concerns about the potential impact on global financial markets and prompted a dramatic sell-off in global stocks. China’s exports, fixed-asset investment, industrial production and auto sales all slowed dramatically in July. The People’s Bank of China recently devalued the country’s currency by about 4%. A slower economy in China means fewer export opportunities for the Eurozone and various emerging markets around the world that had been feeding China’s growth.
Regardless of what has happened recently, we should focus on this: if you look back in history the stock market has endured. The market survived the Great Depression, the crash in 1987, the tech bubble in 2000 and the financial crisis in 2008. In each case, it rebounded. I believe that it will this time too, based on history. It doesn’t always happen immediately, but it does eventually happen.
Until things calm down in the stock market, how do we handle the market volatility? My simple suggestion is that when you don’t know the future, look to history. Look at the historical returns of your portfolio over time. If the holdings allow, look at how they reacted to the interest rate hikes in the mid to late 1980’s. How did they perform in the late 70’s when Social Security was heading towards being reformed? Although past performance is never a guarantee of future results, history can give you an idea of how portfolio managers have responded to adversity in the past, and how they may do so this time. You can also learn that from this exercise is that, although many investments have faced adversity – most are still around. They’ve stayed the course and survived the market shifts to still be viable today.
Generally speaking, I build portfolios for my clients in a similar manner. We go back 20, 30, 40 or 50 years just to get a sense of what the returns have looked like in the past, on an annual basis. We set goals, and using investment options chosen on risk tolerance and asset allocation along with other factors, create a personalized plan for each individual’s needs. There will be bad times, but creating a financial or investment plan and sticking to it can help with the emotional ups and downs that the market can create.
Communication is key! If your financial advisor will not get back to you, call me – I will.
I hope you found this beneficial and informational. For more information about me and my services, visit my website: www.duane.wrfa.com
Thank you for your interest.
This article is meant to be general in nature and should not be construed as investment or financial advice related to your personal situation. Waddell & Reed does not provide legal or tax advice. Waddell & Reed believes the information has been obtained from sources considered to be reliable, but does not guarantee the accuracy of the information provided. This information is not meant to be a complete summary or statement of all available data necessary for making financial or investment decisions and does not constitute a recommendation. Please consult with a tax professional regarding your personal situation prior to making any financial related decisions. Also note that the information provided may include references to concepts that have legal, accounting and tax implications. It is not to be construed as legal, accounting or tax advice, and is provided as general information to you to assist in understanding the issues discussed. Neither Waddell & Reed, Inc., nor its Financial Advisors give tax, legal, or accounting advice. Nothing contained herein is intended as a solicitation or an offer to buy or sell any product or service mentioned and they may not be suitable for all investors.
Duane Silbernagel is a Financial Advisor in Lincoln City, Oregon offering securities through Waddell & Reed, Inc., Member FINRA and SIPC. He can be reached at (541) 614-1322 or via email at DSilbernagel@wradvisors.com.
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