After talking with Doug Richardson, one of PAX Financial Group’s Certified Financial Planners (CFPs), I’d like to share a few market highlights from the first quarter of 2019. How are PAX investments doing? How’s the market? The economy? Let’s take a look.
The Good News
The stock market has continued to climb since the beginning of the year. And on March 9, the S&P 500 marked the 10th anniversary of its current expansion. As of March 12, the S&P 500 index had risen in value 11.49 percent year-to-date. While this has been a great start to the year, the market has yet to surpass its historic high from last fall.
So, what data is there to support the continued asset of this market?
First, the fundamentals of the U.S. economy indicate that there is still room for continued expansion and growth. Low unemployment, a strong labor market and expanding manufacturing surveys all point toward record corporate profits for 2019.
Historically, peaks and earnings growth have been followed by several years of economic growth and stock appreciation.
But can something derail the start of this strong market?
What Could Affect the Market?
The storm clouds that could rain on this parade continue to be the same: The global economy slowing down, geopolitical uncertainty and federal reserve action, just to name a few.
Although a trade deal may be materializing between China and the U.S. in the next couple of months, any misstep or deterioration in these negotiations can still have a big impact on investor sediment. We should also have more clarity on U.K.’s Brexit situation, however, if this event causes instability in the European markets, that turmoil could potentially spill into the U.S. markets as well.
Lastly, if the U.S. market continues to grow, this may cause the Fed to raise interest rates again, which may dampen market growth if the market reacts unfavorably to that news.
Please remember that markets will always have some degree of volatility. But don’t be discouraged during the difficult times and short-term events. Instead, we encourage our clients to stay focused on their long-term goals. If you have any questions or concerns, talk with a financial advisor. He or she can review your situation to make sure your investment decisions now reflect what you’re trying to accomplish in the long run.
I’ve discussed emotional decision-making and the effect it can have on long-term goals in the past, but thought I would bring it up once again.
Emotional decision-making is the biggest enemy of successful investing.
Sometimes, emotions cause us to make bets on the direction of the market or a sector. Other times, we make the unmerited mistake of looking at last year’s winners and shift money that direction. And other times, investors simply rebalance too much.
In full disclosure, the historical returns of the S&P 500 stocks are not certain and you can’t guarantee them. However, as long as people globally are shopping online, going to the grocery store and buying medicine, then the stock market is likely to go up.
Believe it or not, the biggest challenge for investors is not the stock market, but rather, messing around with long-term investments because of boredom, worry, hunches or speculation masked in half-truths. Volatility can be tough for investors, but we encourage clients all the time not to try to outsmart the market. Investors need to stick to the plan and remember their long-term goals.
Reactions Versus Responses
I’ve been in the financial services industry for a long time and talked with thousands of people about their finances over the years. One thing that I constantly try to teach clients is the difference between a reaction and a response. When dealing with money and markets, this is critical.
- A reaction is instant, unconscious and often a defense mechanism. It’s full of juice that makes you feel.
- A response takes into consideration the well-being of not only you today, but your future self and others around you.
Reactions can result in expensive money mistakes. Much of my work is designed to help investors respond, not react, to money challenges.
Here’s another analogy I use; I call it “The Porch.”
When someone isn’t taking huge risks and is well-diversified, I tell clients that when the market goes down, they will fall off the porch, not the roof. In other words, they will experience some paper losses but not to the extreme of others who are taking big bets.
If you’re not working with one of PAX Financial Group’s CFPs, I suggest that you use this analogy when talking to your advisor. Ask him or her how you are invested, and if the market goes down dramatically, will you fall off the porch or will you fall off the roof?
Overall, I’m happy to report that 2019 is off to a good start. PAX investments are holding strong, the stock market is on the rise and the economy is fairing well. If you have any questions about your personal situation, contact PAX Financial Group. Even if you’re not a current client, you can schedule a free, no-strings-attached retirement checkup and our team will not only review your financial well-being but your emotional well-being as well. Worrying about the unknown is not good for your finances or your mind.
This material is provided by PAX Financial Group, LLC. The opinions voiced in this material are for general information only and are not intended to provide specific advice or recommendations for any individual. The information herein has been derived from sources believed to be accurate. Please note: Investing involves risk, and past performance is no guarantee of future results. Investments will fluctuate and when redeemed may be worth more or less than when originally invested. This information should not be construed as investment, tax or legal advice and may not be relied on for the purpose of avoiding any Federal tax penalty. This is neither a solicitation nor recommendation to purchase or sell any investment or insurance product or service, and should not be relied upon as such. All market indices discussed are unmanaged and are not illustrative of any particular investment. Indices do not incur management fees, costs and expenses, and cannot be invested into directly. All economic and performance data is historical and not indicative of future results.