By BECKY GILLETTE
In December 2018, U.S. stock markets had their worst performance since 1931. The Dow Jones had its worst Christmas Eve on record. While those facts are very concerning, Mississippi investment advisers are recommending clients stay the course and avoid the temptation to sell stocks when the market is down so much.
“The best advice I give my clients is, if you get all nervous looking at your portfolio every day, quit looking at it,” said Michelle Mabry, president and managing partner, Client 1st Advisory Group, Hattiesburg. “It is going to be okay. It is not a good time to sell. The economy is still growing right now and nobody can really predict if the markets will recover in 2019 or go down more. But we do know historically all bear markets have been a temporary phenomenon.”
However, Mabry said there is no reason to think this is the end of the downturn and that the markets will recover quickly.
“I predict 2019 will continue to be volatile with government shutdowns and trade wars, growing federal deficits, political uncertainty and the possibility of a recession,” Mabry said. “Nobody can really predict the future, but a good strategy in the past has been to hang tight. Investors who rebalance their portfolios on a regular basis, buying stock when percentages of stocks as a total investment have gone down, tend to do better than investors who don’t rebalance and especially better than those who lose their nerve and panic during a downturn.”
Tiffany B. Ballard, president, Bergland Wealth Management, Ridgeland, said before they take on a client, that person must be willing to be focused on the long-term returns.
“We take a very proactive approach in making sure our clients are prepared for market uncertainty just like what we experienced in the fourth quarter,” Ballard said. “The key is to measure one’s risk tolerance and invest according to his/her unique level of risk. That way when the market starts to decline and the portfolio goes down in value, it should not decline any further than the investor can tolerate. The challenge is staying invested and not reacting emotionally by selling.”
Ballard said there are going to be periods with short-term volatility. But time erases the short-term volatility.
“There is no guarantee,” Ballard said. “Past performance is no guarantee of future returns. When a portfolio is invested in a prudent, globally diversified manner, over the long-term, history shows that the portfolio will outperform the benchmark. And who knows what returns will be for 2019? This could still end up being a good year.”
She also stresses the importance of living within one’s means. Know what your income is going to be for the year and what your expenses are. In retirement, have two years of cash flow available so you are not having to raise cash by selling when the market is down.
Ernie George, principal and owner, E.T. George Investment Management, LLC, Starkville, agrees investors do best to have a long-term view. He likens it to taking your blood pressure every hour, which is probably counterproductive.
“I’ve been in this business since the 1970s, and the only thing I can assure clients is that every decline we have experienced has resulted in not only a recovery, but a new all-time high,” George said. “I don’t know if it will happen this time, but it has happened every other time. I don’t anticipate a great year this year. I anticipate a positive year. I do think over the next two to three years, we will have good results that everyone will be pleased with and can live with.”
George said he was looking at his own investments over the holidays, and he took a hit like everyone else. But when he looked at 2017 and 2018 together, and the average was pretty good. And the returns were also good looking back to 2000 in three-year segments.
“I think we undermine ourselves by focusing on the short term,” George said. “There are times like we are currently in where we have a downturn in the market, but we have also seen significant increases in the market in recent years. This may not be the time to have a lot of risk. It might be time to be moderate. But I don’t think anyone needs to be all in or all out.”
Technology innovations have produced major changes in the economy. An example George gives is that the U.S. has gone from an oil importing country to the largest oil producer in the world.
“Take a vote on how you feel about America’s future,” George said. “If you are a believer in our country and what it stands for, then you have a good opportunity here. It is not a time to be investing in the wild west. With China or Russia, I don’t know their laws or if anyone is protecting me there.”
George stresses the importance of having client-driven goals.
“A goal isn’t saying I want to make “X” return,” he said. “The goal is to fund education, retirement or charitable contributions. Once we have decided what we want to do and what our time limit is, then we look at allocation and diversification to try and put those together to determine what type of growth, as well as volatility, we can expect.”
Stacey L. Wall, CEO of Pinnacle Trust, Madison, said the return of volatility for stocks coupled with the worst December performance since the Great Depression certainly garnered investors’ attention as we entered 2019.
“But in spite of ongoing trade and tariff issues, volatility in the financial markets, the rising cost of debt, and expectations of moderating global growth, we think it is too early to be calling for a recession,” Wall said. “The stock market generally looks forward. While earnings and GDP are both expected to slow this year, the economy is still on solid ground and the Federal Reserve seems to be taking a more accommodative stance.”
Wall expects stock volatility to continue in the first half of 2019 before the market moves higher in the second half of the year.
“Investors need to remain focused on the long term and remember that every stock market decline in history has been followed by a larger rebound,” Wall said. “The key to financial security is to always have a sound plan and then to stick with it through the tumultuous times.”
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