By now, you have probably seen the news that the stock market is taking a dip. There is a lot of information coming at us fast as we watch to see what happens next. We are here to answer a few of your questions.
Why is this happening?
As she finished her term as the Fed Chairman on Friday, Janet Yellen made a comment that prices are on the high end of their historical ranges. She made a point to mention that this didn’t mean that they were overpriced necessarily, but just factually at the top of those ranges.
The market responded with sell-offs, leading to this dip. Either the investor independently believes that prices are too high or is concerned that the comment made by Yellen was right. Whichever the case, this dip does not eliminate the possibility of a positive year-end.
Is this bad?
Not necessarily. It cannot be understated that market corrections are a part of normal price volatility. They are a sign of a healthy market, doing what a healthy market should do.
How do dips like this normally play out?
Our industry tends to look for patterns in market cycles. We want to compare current environments with previous experiences. But history has proven that every correction plays out differently and every market cycle has unique characteristics. Market cycles are nearly impossible to forecast precisely.
What does it mean for me?
If you have a long-term investment strategy, short-term corrections like this are just noise, a blip on the screen. Our portfolios are designed to transition through these types of corrections safely and our investors are positioned to benefit from a healthy market over the long-term.
Should I be worried?
The short answer is probably not. But this is your money and your investment. And we know that comes with some emotions. Where you are financially invested, you are emotionally invested.
Here’s what we’ve found to be true. Over the long-term, history has shown that the market tends to provide excellent returns to patient investors.
If I am worried, what should I do?
Talk to your advisor. Especially if you are currently retired or about to retire and are concerned about income you are taking from your portfolio. Your advisor can help you evaluate whether your strategy is being directly impacted and if any changes need to be made.
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