The market rebounded slightly in the 2nd quarter with the Dow up 1.26% and the S&P 500 up 3.43% over the past 90 days. Year to date the markets remain close to flat or slightly higher. The Dow down 0.73% is while the S&P 500 is up 2.65%1.
In November of 1963, the stock market dropped 3% the day JFK was assassinated, but those losses were regained within 2 days2. While this is an extreme example, it illustrates the unpredictability of how the markets react.
There has been similar unpredictability in the market reaction to numerous news stories over the past 90 days that have impacted the markets. The price of oil has moved higher resulting in higher gas prices. The talk of a trade war and tariffs is heating up. Immigration, while not commonly associated with economic news, has been a very hotly debated and emotional issue.
There is no reason to believe that anyone could predict what the outcome of these issues might be. It would be even harder to predict how the market and your portfolio might react to these issues. This is just one example of why we believe ‘invest in the market, do not attempt to predict it’.
It might sound like a good idea to buy more tech and social media stocks, sell stocks impacted by a trade war, buy stocks that will benefit from tax law changes and sell stocks with businesses that are out of favor. We have a new blog post up on our website that talks about why we don’t try to make tactical portfolio adjustments. The academic research shows that it often does not work, and the additional risk is not worth the potential gain. It seems that the only reliable outcome of this strategy is increased stress.
We continue to monitor your investments on a family by family basis and make adjustments as needed to keep your portfolio aligned with your long-term goals.
The full Q2 2018 report is available here.
1Source: LPL Research, June 30, 2018
2Source: USA Today, Stock impact of JFK murder steep but short, Adam Shell, Nov. 21, 2013
The opinions voiced in this material are for general information only and are not intended to provide specific advice or recommendations for any individual. All 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. No strategy can ensure success or protect against loss.