As you are no doubt aware, equity markets around the globe are experiencing a very rough start to 2016. In fact, what was the worst (or one of the worst) first weeks in history has continued into the second. In retrospect, it has been a poor 12-18 months.
Even though the team at Nachman Norwood & Parrott has been in the wealth management business, on average, for 20-30 years, we are still unable to predict exact outcomes of financial markets. While we, and others, can spend numerous pages of ink trying to explain the “why” as well as our best opinion on the outcome, the truth is that no one knows for sure. Rather, we prefer to use common sense and tell you what we do know.
Regardless of all the “noise” in the market and the world (China, the price of oil, terrorism, and the presidential election), the simple fact is markets and stocks are ultimately based on earnings and valuation. As you have heard us say several times during the last one to two years, most equity markets have not been cheap but may be fairly to slightly overpriced. The S&P 500 had a tremendous, virtually uninterrupted, upward move from its low in March of 2009. Markets do not go straight up but generally take breaks along the way. In the same regard, economies do not grow without breaks along the way. Both the US market and the US economy will ultimately take a pause. We may be seeing it in the market right now, but no one is certain. Historically, these pauses are not reason for panic and are generally mild and short-lived. They are sometimes worse as was the case in 2008. At present, we do not see why the current downturn would be a deep one. Interest rates are low, inflation is low, the economy is growing, unemployment is low, and corporate balance sheets are much stronger than pre-2008.
As for what we do know, we believe that variable markets go up and down and potentially will end higher. We believe that the day-to-day practice of common sense financial decision making will be rewarded. We believe that those with reasonable time horizons will prosper over time. We believe that proper diversification will work. We believe that the best way to make money in equities is to stay invested. And lastly, we believe that having a proper plan, developed according to your specific goals, helps ease the way.
Please call any of us if you would like to talk.
Nachman Norwood & Parrott
Wealth Management Consultancy
Stocks offer long-term growth potential, but may fluctuate more and provide less current income than other investments. An investment in the stock market should be made with an understanding of the risks associated with common stocks, including market fluctuations.
Investing in foreign securities presents certain risks not associated with domestic investments, such as currency fluctuation, political and economic instability, and different accounting standards. This may result in greater share price volatility.
The views expressed by the author are his own and do not necessarily reflect the opinion of Wells Fargo Advisors Financial Network or its affiliates.
Diversification does not guarantee profit or protect against loss in declining markets.
In the January 1 issue of the Greenville Journal, Bob Nachman, Managing Partner at Nachman Norwood & Parrott in Greenville and associated with Wells Fargo Advisors Financial Network, LLC, talked about the changes coming to social security in 2016 in a bylined column. Congress enacted several changes to protect the overall Social Security system’s solvency. “It is important for you to understand what these changes are, how they may affect you and, ultimately, what this means for your future retirement. Before you visit your local Social Security office to make any alterations to your claiming strategy, discuss your situation with your financial advisor first.” Click here to read to full article.