They call it a “rotational correction.” That technically means in stock market lingo, that money invested in stocks in one industry is moving to another industry as investors and traders anticipate the next stage of an economic cycle. The conventional wisdom is that the economy moves in a predictable cycle from boom to bust and back again. Throw in a Pandemic, a contentious election year, a few fires and hurricanes, civil unrest resulting in never ending destructive riots and it gets a little complicated. Oh, one more thing – now we can argue about the Supreme Court replacement for Justice Ruth Bader Ginsburg. Trying to mesh the impact of all that into an investment decision is a task. I wish the so called “market timers” much luck.
However, before we become so overwhelmed that we simply emotionally shut down and make poor decisions, let’s consider the things we can know. Perhaps seek out the consensus of bright minds who have crunched the data. First of all, according to the Survey of Consumer Finances, 48% of U.S. households (for better or worse) are not participants in the market. Over the long term they are probably sorry for that, over the short term it is probably best for them. One of benefits of our freedom in America is we all have the right to buy high on euphoria and sell low in a panic – guaranteed to lose money. That large group is wise to pursue other alternatives. The other 52% may want to read further.
After surprisingly setting all-time highs, stocks have fallen for a third straight week for the first time in a year. A lot of that is blamed on the pull back of the “mega-cap” technology stocks with several high-profile names dropping close to 5%.
I think a consensus is that market dynamics are shifting. These huge, dominant technology firms seem to be declining notably, while other sectors of the market are holding up better. This is a distinct reversal of the trend we’ve seen through much of 2020.
In fact, many “credible experts” I follow suggest that the markets remain over-bought and they expect the “rotation” and sell off to continue over the near-term. If that makes sense to you, then this is a time to be very selective and focus on the real value of companies. For most of us that means two things: 1) you need to have expertise at determining the sometimes subjective notion of “real value” and 2) If you aren’t’ in it for the long term, you might should join the other 48% who are not participating in the market.
To me, all the above suggests that this is not something you should do at home alone. There are many professionals who have expertise in these matters. As a group, in the comprehensive wealth management business, we utilize them daily. With good advice helping one to select where to invest, how best to manage risk, how to align your goals with a portfolio and monitor it, you actually can achieve success even during chaotic times. Remember, diversification means “always having to say you’re sorry.” This remains a time to be selective and stay strapped in even when the short-term winds of change unnerve you.
Let me close by mentioning some wisdom recently imparted by my dear friend, author and recovering global CEO, Robert Hall. In his latest writing he reflects on little league baseball. One team wins, one team has to lose. Regardless of outcome, they line up and pass by each other high fiving with acceptance of the result. The loser knows there is always tomorrow – perhaps gets to work on weaknesses in their skills and everyone goes home all the better for it. Wouldn’t it be nice if our political leaders could learn from their children and grandchildren?
The opinions voiced in this material are for general information only and are not intended to provide specific advice or recommendations for any individual. To determine which investment(s) may be appropriate for you, consult your financial advisor prior to investing. The economic forecasts set forth in the presentation may not develop as predicted and there can be no guarantee that strategies promoted will be successful. Performance referenced is historical and is no guarantee of future results. All indices are unmanaged and may not be invested into directly. Investing involves risk including loss of principal.
Visit us at www.williamsfa.com. Tommy Williams is a CERTIFIED FINANCIAL PLANNER™ Professional with Williams Financial Advisors, LLC. Securities offered through Private Client Services, Member FINRA/SIPC. Advisory Services offered through RFG Advisory, a Registered Investment Advisor. Williams Financial Advisors, LLC, and RFG Advisory are separate entities from Private Client Services. Branch office is located at 6425 You’re Drive, Suite 180, Shreveport, LA 71105
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