The market is down. What would a good financial advisor say to you right now?


Key points to remember

  • A vicious circle: more bad news leads to more market declines, which in turn will lead to more bad news and more market declines.
  • If an economic report is worse than expected, the markets will be upset. Numbers matter the most compared to expectations, when there is a surprise, the market gets excited.
  • For people who are sitting on the money or waiting for the right time to enter the market, a DCA approach is a great approach to consider at this time.
  • Recency bias can hurt you, yesterday’s winner could be tomorrow’s loser, it’s unwise not to look at your portfolio and assets right now.

Inflation Report

The news is bad. When the news is worse than expected, it’s very bad. Analysts expected a bad inflation report, but the actual report was even worse than they thought. This surprised the market, and the market hates surprises. We are seeing big dips in the first hours of trading, more than 800 points lower on the Dow Jones.

Today’s market acceleration feels like a frightening roller coaster ride. If you are in the market for the lows, you will have to get out for the highs. We don’t know how long it will take and there may be more exhilarating falls to come, but if we can sit still and get out, it will end.

What will be the next shoe to drop?

This could be a catalyst that instills fear in investors and future data reports that come back with bad news and can drive the market down even further. This could be accelerating the downward spiral in a vicious cycle for this market. More bad news leads to more market declines, which will in turn lead to more bad news and more market declines. The definition of a vicious circle.

Is this a buying opportunity?

The real investors among us see this fear of the market as an opportunity to buy at a discount. Things are cheaper today than they were a day ago. The concern is that you are buying today and things keep going down. As the old saying goes, buying in a bear market is like trying to catch falling knives. You could hurt yourself as long as the knives continue to drop in the market.

If you are a long-term investor and have confidence in the viability of a given company or index, you may be well served to buy these market declines. As the market can continue to fall further, you can continue to buy stocks at deeper discounts, this approach is called dollar cost averaging (DCA). For people who are sitting on the money or waiting for the right time to enter the market, a DCA approach is a great approach to consider at this time.

There will be more economic calendar reports this week. We’ll see the Producer Price Index released on Wednesday, the Empire State Manufacturing survey on Thursday as well as retail sales data from the Census Bureau. Finally on Friday we will see the Consumer Confidence Index reported. These reports are on the economic calendar this week and they carry expectations of the seriousness of the situation, if a report is worse than expected, the markets will be upset. Numbers matter the most compared to expectations, when we are surprised we are upset.

Where are you in your financial life?

If you analyze your personal financial situation with all this news, it is important to filter this market environment to your stage of life.

If you’re in your 20s, keep your head down, work hard, minimize debt, and invest in your 401k and investment account when the market goes down. Your time horizon is long, especially for young people in their twenties planning for retirement.

30s and 40s – you are more established, you are not a beginner as an adult, seek to minimize your debts and increase contributions by no more than 401,000. This market decline is an opportunity for you, your time horizon is still long for retirement.

50’s & 60’s – it’s real, there is light emerging at the end of the tunnel with retirement. Seek to save as much as possible in retirement vehicles. Maxing 401k and additions to IRAs. Understand your lifestyle and how much it costs, try to understand the income you’ll need for retirement, and match that needed income to the income you’ll get from your retirement resources.

70’s and beyond – protect yourself from the downside, you may not be buying new stocks like you once were, but income is key. If you are good at cash for your daily needs, not much has changed for you today. Try to be careful and thoughtful with your investments, taxes and estate planning decisions.

Doing nothing is not a good answer

The last 13 years with the stock market have been quite a glorious run to the top. I still remember March 9, 2009 when intraday trading on the Dow hit 6,500. That was my mental background and I made a few purchases that day. Admittedly, I didn’t hold them for the long term and sold them too early, but that’s another story.

The salient point here is that many people have become happy with their investments because the market has roared for over 13 years. The reality is that recency bias can hurt you and adjustments need to be made. Yesterday’s winner could be tomorrow’s loser, it’s not wise to ignore your portfolio and assets right now. You have to ask yourself the question, “What is my best next step right now, for my wallet and my life stage?” »

There are tools that can help you, there are ways to work smarter with how you hold your investments and make decisions. Investments are a big piece of your financial puzzle and it’s a fluid situation with this market, but don’t forget to also consider your insurance, cash management, tax planning and estate planning, they may not be urgent like your investments and your retirement, but they are important. too.

Keep calm and invest in…

Be careful not to get carried away by the sensationalism of the headlines and the media buzz. Yes, the economic news was bad today, it may get worse before it gets better, but you know where you are and you know where you are going financially. These market cycles are normal and integral to how an economy expands and contracts.

It’s also important to have confidence in the resilience of businesses to find a way to meet a need or sell a product and make a profit. Lower valuations on your investments can be daunting, but control what you can control, find the right fit for your financial life stage, and move on.

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