by Frederick A. “Rick” Fisher, MS, CFP®
The month of January has been awful on Wall Street, with the S&P 500 posting its worst year-opening week in history by losing 6%, followed by daily ups and downs. Global stock markets lost $2.3 trillion the first week of the year, alarming investors who worry about the market forecast for the remainder of 2016. Baby Boomers especially are nervous about the large fluctuations and the impact on their retirement accounts.
The market downturns were a result of a number of factors including:
Large losses in the Chinese stock market
Low oil prices
The recent interest rate increase
However, at times like these, it’s important to put current conditions into perspective. This is not the first time the market has taken a tumble and it won’t be the last. Over the past 60 years, there have been 15 occasions where the stock market has declined by 20% or more. These bear markets have lasted an average of 10 months and brought stock market values down an average of 29% (Source: Wall Street Journal). While last week was difficult, unfortunately, we anticipate more volatility in the weeks and months ahead.
While easier said than done, successful long-term investors know that it’s important to stay calm during a market correction. Market volatility has increased in recent years and the media can often make it seem like each episode is worse than the one before. In reality, volatility does not hurt investors, but selling when the market is down will lock in losses.
At Ostrofe Financial Consultants, we understand that you are likely concerned with the recent downturn. However, we encourage you to keep in mind that while the stock market may be down significantly, your portfolio is made up of both stocks, bonds, and other assets that are designed to work together to decrease overall volatility. It’s important to consider your specific portfolio, investment horizon, and circumstances when reflecting on economic events.
The only thing we know for certain about the markets is that there will continue to be ups and downs. The recent stock market drop wasn’t a crash; it was a correction. These corrections can occur within any timeframe and can be caused by a number of different factors. Predicting what will cause the next correction and when it will happen isn’t possible. Rather than predict what will happen next, it’s more important to determine how you can position yourself to weather corrections of small and large magnitude.
January’s correction wasn’t the first, and it won’t be the last. In fact, Deutsche Bank’s research shows that the stock market, on average, has a correction every 357 days. Market corrections are an inevitable part of owning stocks. While we don’t know for certain when the next correction will occur, you can prepare yourself and may feel more confident in your plan by speaking with our team. Call our office at 530-273-4425 or email us today.
About Rick Fisher
Rick Fisher is a financial consultant offering comprehensive financial planning and investment management with Ostrofe Financial Consultants, Inc. in Grass Valley, California. His goal is to help clients prepare for retirement and pursue their financial dreams in a fun and personal way. Rick serves clients in 15 states, though most reside in California, including the greater Sacramento, Los Angeles and San Diego areas.
Credentials and Experience
Rick holds FINRA Series 7, 63, 65, 24, and 51 licenses and is supported by Ostrofe Financial Consultants and National Planning Corporation. He also holds his California Insurance License and the designation of CERTIFIED FINANCIAL PLANNER™ professional (CFP®). The CFP® designation is awarded to experienced financial professionals who pass an examination and pledge to abide by a strict code of ethics. He holds himself to their high standards of integrity, objectivity, professionalism and confidentiality. Please note: NPC does not render tax or legal advice.
How Rick Can Help
Rick strives to take the fear and stress out of financial planning. He works with clients to uncover financial issues they may not have known about or have not yet addressed. Rick and the Ostrofe Financial Consultants team are there to answer questions, guide clients towards their goals, and help them feel confident in their future. To learn more about how Rick may be able to help, call his office at 530-273-4425.