A friend of mine reached out because he was concerned about the financial headlines and wanted to talk to his wife about it.
I told him they should turn to their investment professional before making decisions. Investing decisions should never be made impulsively.
Your investment professional is likely to remind you that your portfolio should consider a number of factors, starting with the following.
Time horizon
Your time horizon is a key element in picking a specific security, asset allocation, and risk level. It can help you make informed decisions and meet your financial goals.
Couples whose retirement goals are more than a decade away are likely heavily invested in the stock market. As a retirement goal nears, the reallocation of assets is often appropriate, shifting to holdings that are more conservative.
Diversification
Diversification is often explained by stating that you should:
“Never put all your eggs in one basket.”
Diversification can take several different forms, and many investors diversify within their early-stage investment portfolios and by investing in different asset classes. Also, consider investing in markets outside of the United States through low-cost index funds.
For example, are you invested broadly in index funds in global markets and the United States?
Risk tolerance
Can you handle the wild swings in your portfolio? If so, to what degree? Risk tolerance is an investor's ability and willingness to lose some or all of an investment in exchange for greater potential returns.
The illustration above nicely illustrates your tolerance for investment risk.
Current Market Turbulence
The stock market eventually rises and compounds. So the trick isn’t to time the market, it’s time in the market! But that doesn't change what we are experiencing right now.
Yes, since the inauguration, U.S. markets have been clobbered by Chinese markets and outperformed by European markets.
Nobody can pinpoint why because markets are the choices of the masses, and the masses might have different reasons.
Tariffs and Inflation Fears
Perhaps it has been because of the immediate instability in our political system stemming from executive orders since Inauguration Day. It may be the threat of tariffs that could explode inflation. [source]
Systemic Risk in the Financial System
Another possibility is the reality of DOGE halting federal consumer protections and creating massive regulatory holes for the Big Banks by stopping the work of the CFPB. Doing so is sounding off alarms, even with the banks. [source]
Consumer Sentiment
The news that hit the stock market especially hard today was a massive one month drop in consumer sentiment [-9.8%] and how consumers feel about the economy [-12.5%]. There are any number of reasons consumers could be spooked.
It could be as simple as the market temporarily running out of steam. Under President Biden, the S&P 500 finished up over 55%. [source]
Wrapping it Up
There is no way to know for sure because the markets represent the fears and confidence of the masses. If you or your spouse are concerned, schedule an appointment with your investment professional.
If you want to learn how you and your spouse can have a conversation about the current state of the stock market, a perfect place to start is our past post: Comparing Investment Strategies with Your Spouse or Partner: Part 1.
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