The Tap on the Shoulder

Did you feel it?  You know, that proverbial tap on the shoulder the past 2 months.  Yes, of course, I’m speaking of the spike in volatility of the stock market recently, compared to the extremely and abnormally calm, easy gains the market delivered last year to investors.

Investors shouldn’t panic but absolutely, if they haven’t already, review their financial and retirement plan, as well as their portfolio risk.  Many commonly used financial industry risk assessment and analysis tools are backward-looking and don’t model out potential future stress scenarios as well as potential future long-term returns.  This is important because investors who plan to retire in the next 5-10 years or those who have recently retired could in the coming years be faced with one of the 3 biggest risks to a successful retirement, a major bear market around their anticipated retirement date or soon thereafter.

Markets do tend to increase in volatility toward the late stages of a bull market.  I’m not making a call here that it’s a sure thing or imminent, but probabilities are certainly higher than they have been in the past 9 years since this bull market began.  Everyone likes to try to find a reason for what will end this bull market but make no mistake, sometimes markets just exhaust themselves.  Oh sure, there will be a catalyst that will carry the blame, but it doesn’t mean it will be THE reason.  The best an investor can do is look for clues that exhaustion is near.  Yes, extreme monetary policy by the central banks around the world including our Federal Reserve, have muted some of the traditional signals investment managers would typically use to clue them into a change in the tide.  However, as we appear to be unwinding almost 10 years of the most extreme monetary policy in history, investment managers and investors may once again be able to rely on some of those historically more reliable metrics that may alert them to a pending bear market or recession.

I write this as a financial planner and wealth manager who has seen an increase recently in client concerns and conversations as many would ask “is there anything we can do to try to preserve my gains or what I have?”  Sound familiar?  Advisors can’t control the markets, but they can help address the multitude of risks an investor takes with their investments.  So, if you felt the market tap you on the shoulder here recently, I’d encourage you to explore all your available options around risk mitigation strategies for your retirement portfolio and how they fit in the context of your financial plan.  You may be surprised to learn there are things you can do that you didn’t even know about, that may potentially be a better fit for you and your circumstances, here and now.  But don’t wait to do your assessment.  If it makes sense for you, 2018 might just be the last year to adjust your strategy before our next significant market or economic downturn.

*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.