Thoughts To Consider
A pause before we move forward
In order to stay in the game, it is important to understand down markets and the impact they have on your financial plan. If you have lost sleep over the last few weeks due to market conditions, it is likely you have too much volatility relative to your tolerance for risk. Over the years, my experience has been that investors who make dramatic allocation decisions and “quit” the equity component, usually regret the decision in the future. The bottom line is that your plan should help bring discipline during times of adversity. The same can be said in the game of football. For example, the Irish of Notre Dame were down 21-3 at Clemson going into the 4th quarter. In essence, the game was over except Toledo’s DeShone Kizer and the Irish had other thoughts regarding their dilemma. Most teams would simply give up; the Irish did not and almost found a way to tie the game at the end, despite a hostile crowd and remnants of Hurricane Joaquin creating havoc. The fans, players and coaches persevered through brutal conditions while each and every stoppage of play for revenue producing television commercials accentuated the elements. The Irish stuck with their game plan and did not quit keeping their long-term goals in reach if they win their remaining games. This scenario can be related to your financial plan. During emotional times in the marketplace, your plan can help you avoid potential decisions that can be detrimental to your overall long-term goals and objectives.
Gravity never loses
As we started our trek back from Clemson to Myrtle Beach, we encountered rain like I have never seen in my lifetime. We stopped and chatted with a lot of locals and witnessed many homes under water and cars completely submerged. The rain accumulated and flowed very quickly to the low-lying areas without regard to property and life. We were very lucky to make it back safely and my thoughts and prayers go out to all of the people suffering in the Carolina’s. Obviously, investing and planning for retirement is nothing like the calamity in the Carolina’s, however, we can gain some perspective with the world markets relative to water finding low level areas and valuations in the U.S. equity markets. Our equity markets were modestly overvalued; it was similar to driving a car 69 M.P.H. in a 65 M.P.H. speed zone. All we did was come down, as gravity always wins, to a more appropriate valuation given what has happened with earnings and geo political events. Furthermore, it appears we have re-tested the August lows creating a W pattern and that my friends is a healthy indicator.
What have we learned?
It is obvious, at this time, the Fed will not be raising interest rates anytime soon. Investors may begin to take comments from the Fed with a grain of salt as they comment about their desire to raise rates. We are entering the earnings season and the results will show significant reductions with numerous energy companies or perhaps anything yummy. It is important to note, if we take out energy companies, most of our earnings reports will be like Goldilocks…not too hot or too cold and modestly higher. With that, we can move forward after our current pause as the market begins to focus on the earnings picture for 2016. Remember, to stay in the game, stick to your plan, manage your expectations, and get your arms around the true risk within your investment plan. In conclusion, I leave you with the following quote, from an unknown author that was in our strategy report. “Dear optimist, pessimist, and realist, while you guys were busy arguing over the glass of water, I drank it. Sincerely, the opportunist.”
Neil C. Garrison is a Financial Advisor with Raymond James Financial Services, Inc., Member FINRA/SIPC. Any opinions are those of Neil Garrison and not necessarily of RJFS, Raymond James, or this publication. Garrison Financial, LLC is located at 7261 West Central Ave. Toledo, OH 43617 and can be reached at 419/214-4000.