If you’ve taken a look at your investment account statements over the past two months you’ve more than likely experienced two completely different outcomes. This is the definition of extreme volatility. The S&P 500 Index and the Dow Jones Industrial Average Index recorded their worst December since 1931, with the S&P 500 dropping -9.18% and the Dow down -8.66% as trade war fears, concerns about interest rates and political dysfunction weighed on the markets. In a complete turn of events, the S&P 500 and Dow rebounded in January, gaining +7.87% and +7.17% respectively, seeing the best one month gain since 1987. Case in point...the following chart of U.S. diversified stock Morningstar Categories from December 2018 to January 2019:
The past 2 months are a great example of why it’s important to keep a long-term focus and disciplined approach with your investments. Short-term price movements and financial news headlines generate emotions (anxiety and joy) but getting caught up in price swings can lead to poor investing decisions. During these times, it is best to do a check-up on your overall asset allocation (blend of stock funds, bonds, cash...etc). Proper asset allocation provides guide rails for your investments, balancing risk and return with your personal short and long-term goals. We do our best to ensure our clients are invested how they should be so they can weather the storm while also participating in market growth.