The wild swing in the market this week has some wondering if now is the time to get out of the market. In 2017 we saw an unbelievably steady market, which leads us to believe that profit taking and reallocation is inevitable.
Though this abrupt drop seems severe, it is important to keep things in perspective.
Since the beginning of the current bull market, which started in March 2009, the S&P 500 saw a 10% or higher correction in four separate years (2010, 2011, 2015, and 2016). In each of these occurrences, markets stumbled for a quick pullback before continuing to rally higher backed by strong fundamental data.
The current selloff started on Friday, following a strong jobs report, which caused investors to speculate the Fed may be more aggressive than expected with rate hikes in 2018. This had a negative impact on stocks because higher interest rates generally hamper economic growth in the long-term. The selloff continued on Monday for seemingly no reason other than investors taking gains from an abnormally strong year in 2017 and algorithmic/computer-based trading.
Looking ahead, the likelihood of continued economic growth and market increases are high since many fundamental economic indicators remain positive. However, it is important to know that there is no way to predict if and when a market correction will occur.
The past few days of market returns have been alarming for many investors and it poses a risk for some investors to make poor decisions. When a market is correcting, it is most often not the time to begin selling. The decision to sell or reallocate your portfolio should be considered when emotions are more in check with your long-term goals.
By sticking to a strategy and maintaining a broad range of asset classes in your portfolio, you can avoid chasing short-term movements and news, and in turn, your probability of success is improved greatly.
It is good to perform a self-check in times like these to examine whether or not the portfolio you have is in line with your risk tolerance. If you are unsure of the level of risk your current portfolio has and have questions about how to better diversify let me know. This is a common question and I am happy to discuss this with you.
The article and opinions in this publication are for general information only and are not intended to provide specific advice or recommendations for any individual. We suggest that you consult your accountant, tax, or legal advisor with regard to your individual situation. Kalos Capital, Inc. does not provide tax or legal advice. The opinions and views expressed here are for informational purposes only. Please consult with your tax and/or legal advisor for such guidance.