President's Blog - The Perfect Time to Panic

10/22/2018

One of the funniest lines in the Toy Story trilogy of movies came in the first film when, in the midst of some harrowing adventure, Buzz Lightyear told the toys “This is no time to panic” and Woody cried “This is the perfect time to panic!”

If an affluent investor is prone to panic, this might be the time that investor would be climbing the walls.

Is it your job to pull them down?

Calling the current stock market “volatile” is almost under-selling the meaning of the word “volatile”. A recent spate of stock market losses prompted by international relations between the United States and our major trade partners, combined with concerns over the impact of events related to our relationship with Saudi Arabia, has created a mood of certain uncertainty among investors.

For every news report of turmoil, President Donald Trump issues a statement, often by Twitter, assuring Americans all will work out and promising positive results from our nation’s maneuvers. Then he throws in a promise for a new tax cut for middle income Americans two weeks prior to the midterms and hope floats once again among investors.

All of this confusion is occurring two weeks before a mid-term election, and the results of those statewide elections will be viewed with trepidation on both sides of the legislative aisle in Congress, while investors try to figure out what it all means.

And they will be asking you “What does this all mean?” You need to be prepared for that question.

In the beginning of 2018, the stock market had a volatile period when the optimistic investors looked to the Christmas tax cuts for beneficial corporate returns while the pessimists paid attention to new talks about tariffs and global instability. The markets were on a roller-coaster.

Spectrem asked investors at that time if they wanted to hear from their advisors during those turbulent times to discuss the impact of the market and whether any changes in portfolio or asset allocation needed to be made. Only 25 percent of investors said they had more frequent contact with their advisor during that time, and a very nominal percentage of investors expressed dissatisfaction with their advisor over their contact as the stock market roiled.

But, with the midterms approaching, Spectrem again asked investors if they wanted to discuss with their advisor the implied or anticipated effects of the midterm elections on investment strategies, and 47 percent said “Yes”. Have you discussed the midterm elections with 47 percent of your clients?

Most investors invest for the long term, and wise investors understand that the path to value in investing comes from avoiding sudden emotional responses to current events. Considering the frequent nature of controversial events in today’s society, it might be even more timely for advisors to remind investors that they are invested for long-term growth and not to be concerned with day-to-day trading results.

But for the next two weeks, it is going to be difficult to keep nervous investors from wondering what is going to happen to their bottom line before and after Nov. 6. This will be a busy time for advisors, and it might be wise to be proactive in making contact with those investors you know to be the type to respond to current events.

You may need to tell them now is NOT the perfect time to panic.