What an incredible performance for the stock market (S&P 500) in the first quarter of 2019, indicative of its 13.65 percent increase.
This was the best first-quarter return since 1998! This past January's 7.9 percent increase was the best start to a year since 1987, and what is even more unbelievable is that the market had its worst December since the Great Depression! Now that is volatility!
Allow me to remind you (and me) that during the first nine months of 2018, the S&P 500 advanced 9 percent, but, out of nowhere, the panic selling arrived, wiping out all their hard-fought gains to end the year with about a 4.4 percent decline. It was the first time the market ended the year with a loss after being positive for the first three quarters. Yes indeed! The messenger of misery was in full force and the pouting pundits of pessimism were hyperventilating with the “I told you so” rhetoric.
I do not have, never have had, and never will have an opinion regarding the short-term direction of the stock market, interest rates or economic activity. I would never imagine predicting a stock market correction, bear market or the next recession, as I am not and never will be a trader. Instead, I am an investor that implements portfolios for the long run (5 to 10 years) that are prudent, diversified and cost effective. Investing is simple, but so many folks make it incredibly difficult because they allow fear and greed to dictate their investment decisions by thinking they can time the market. In my opinion, this approach is unwinnable!
Whether another correction or prolonged downturn in stocks begins in a couple of weeks or a couple of years, it is coming, so let’s not be surprised when it rears its ugly head. Recessions and corrections are a natural part of the business cycle, and we should accept it, warts and all! Nevertheless, while the stock market is trading near all-time highs, again, I encourage you to pause and reassess your risk tolerance.
In other words, if you want to consider reducing some of your stock exposure while allocating to a more risk-averse strategy, I suggest that it is better to do it while the market is near record highs than during a stock market correction when fear is in the air. On the other hand, if you have implemented a professionally managed, diversified, prudent and cost-effective portfolio, you should be just fine riding out the next downturn, whenever that might happen. Whatever your position, your financial advisor should be ready and willing to discuss your portfolio and risk parameters. Nevertheless, allow me to conclude my narrative with words of wisdom that are about as obvious as the color of the White House. People are overly optimistic when the market begins to crash. To the contrary, folks are overly pessimistic when the economy and stock market begin to recover. Rinse and repeat, as this is the never-ending loop of economic amnesia.
Harry Pappas Jr. CFP®
Managing Director-Investments
Master of Science Degree Personal Financial Planning
Certified Estate & Trust Specialist ™
Certified Divorce Financial Analyst™
Pappas Wealth Management Group of Wells Fargo Advisors
818 North Highway A1A, Ste 200
Ponte Vedra, Florida 32082
904-273-7955
harry.pappas@wellsfargoadvisors.com
The use of the CDFA™ designation does not permit Wells Fargo Advisors or its Financial Advisors to provide legal advice, nor is it meant to imply that the firm or its associates are acting as experts in this field.
Wells Fargo Advisors is a trade name used by Wells Fargo Clearing Services, LLC, Member SIPC, a Registered Broker-Dealer and a non-bank affiliate of Wells Fargo & Company.
This and/or the accompanying statistical information was prepared by or obtained from sources that Wells Fargo Advisors believes to be reliable, but its accuracy is not guaranteed. The report herein is not a complete analysis of every material fact in respect to any company, industry or security. The opinions expressed here reflect the judgment of the author as of the date of the report and are subject to change without notice. Any market prices are only indications of market values and are subject to change. The material has been prepared or is distributed solely for information purposes and is not a solicitation or an offer to buy any security or instrument or to participate in any trading strategy. Additional information is available upon request. Past performance is not a guarantee of future results.
