What to Do when the Markets are Up, Down or Sideways?

Our country recently experienced one of the most raucous and divisive presidential elections in recent memory. And, since January, we have been bombarded with news related to the new president’s actions and policies. Depending on your preferred news source, the Trump presidency is either the saving of the American democracy or a sign of the coming apocalypse. Either way, such all-or-none viewpoints tend to make us nervous, no matter which side our beliefs fall on.

In times like these, financial planners often get calls from clients who are, not surprisingly, anxious about their investments. “The market is at an historic high; should I be worried?” “The Fed is raising interest rates; should I be worried?” “The European Union is having problems should I be worried?” “Employment is up, but not by very much; should I be worried?” And the list goes on.

Actually, it is very understandable to be concerned by headlines. Back when President Obama was elected–with the economy reeling from a financial crisis that threatened many of our largest institutions–many conservatively minded investors were convinced that the election of a liberal Democrat was going to be the death of the stock market. Most financial advisors did their best to calm such fears–and a good thing, too, since, for example, the DJIA went from a low of 6,443 in the depths of the Great Recession to a high, in mid-March, of nearly 21,000. On the other side of the coin, investors of a more liberal mindset might have felt panic at the election of Donald Trump. But thus far, such fears have proved unfounded: the DJIA was at 19,827 on the day he was sworn in, and as I write this, it stands at 20,596–a 3.9% gain in the last two-and-a-half months.

Of course, what these investors are really asking is, “What’s going to happen?” And the only truthful answer for any advisor to give is “We don’t know.”

What we do know, however, is that no matter which direction the markets take, investors will still need to save for retirement, education, and other important life-phase-driven events. We also know that diversification tends to protect assets from major changes in value in any single market sector. We know that those approaching retirement can often benefit from prudent, planned movement into more conservative holdings, and that those whose horizon is longer will almost always see good results by holding to a well-conceived strategy, trusting that over time, the markets will generally reward those who are patient and disciplined enough to stay the course during the inevitable downturns.

There is no question about it: we live in an uncertain world. But taking the long-range view can help iron out the discomfort that comes with day-to-day fluctuations. Keep your eye on the goal, trust in your strategy, and maintain appropriate diversification. This advice may not be as exciting as the latest news headline, but it has stood the test of time and the markets–both good and bad.

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