As I write this (on Friday 3/7 at around 1:15pm), the headline on the CNBC website says “S&P 500 is flat, but heads for worst week since September.”
Stock market volatility…we all hate it, unless of course the volatility is moving the market upward; then we love it.
A large reason for the volatility (for this week, at least) is…wait for it…tariffs. On again, off again tariffs are creating a lot of uncertainty, both on Wall St. and on Main St. And who, after all, likes uncertainty? Not the stock market!
While it’s tempting to share my thoughts on the effectiveness of tariffs, that probably isn’t the best use of time and energy. Rather, I’d prefer to take this opportunity to remind you of a few important investing principals. This is not an exhaustive list of things to remember when investing (and when staying invested); it’s just a few bits that I have on my mind at the moment:
- Economic cycles ebb and flow, and the financial markets are very resilient. We shared during a presentation last year that the general trajectory of the stock market is up over the long term, no matter who is in office, or who controls Congress.
- Your rate of return is important, but it is far less important than your rate of savings.
- It’s really helpful to remember that areas of the economy that provided good returns in the past (think the “Magnificent 7” stocks of the S&P 500) won’t always provide the best returns in the future.
- To that end…diversify diversify diversify.
With respect to points 3 and 4, consider that the S&P 500 index had been the best performing major world index each of the past 2 years. We invite you to further consider that, even before this week’s rough performance, the S&P was up just 1.44% YTD, while the foreign stock index MSCI EAFE was up 7.32%. What served as drag on your returns last year is helping to bolster your returns this year. Of course, see again principal #3 above.
There are several other principals to consider when starting and maintaining an investment strategy. If you ever want to talk through yours, please reach out to us to schedule some time.
The opinions expressed are those of the author and not necessarily those of Guardian or its subsidiaries.
Investing in foreign securities may involve heightened risk including currency fluctuations, less liquid trading markets, greater price volatility, political and economic instability, less publicly available information and changes in tax or currency laws. Such risks are enhanced in emerging markets.
Past performance is not a guarantee of future results. All investments contain risk and may lose value.
Diversification does not guarantee profit or protect against market loss. Indices are unmanaged and one cannot invest directly in an index.