DC
I know it is a really tough question, and it may be a bit personal. However, I have to ask . . . which DC are you right now?
Washington, DC, is the source of much market angst at the moment. The primary culprit is the on-again, off-again, delayed-again, and immediately implemented tariff policies. I honestly have no idea how any government official responsible for collecting tariffs can possibly be assessing them correctly. It has to be an administrative nightmare.
Then imagine you are an importer whose shipment just happened to cross the border during the 6 hours that a higher tariff rate was in place. How would you feel about the privilege of paying an extra 25% for goods that almost everyone else imported at a much lower cost. Is that even close to fair?
If we had to assess DC’s current tariff policies on a scale of Disciplined to Chaos, Chaos is winning hands down.
Chaos is one of the financial markets’ worst enemies. Traders like to live under the illusion that the future is fairly predictable even when it is not. That illusion of predictability motivates traders to invest in businesses that they believe will be profitable in the future.
Chaos flips traders’ confidence to doubt. And doubting traders stop buying and start selling — which explains precisely where the financial markets are today.
After setting a record high on February 19, the S&P 500 Index has stumbled (see our Turning Point blog). Now that doubt has crept into traders’ minds, there is the potential for some of that contagious doubt to spread to the minds of long-term investors.
Long-term investors have a different approach to investing in stocks. On a scale of Disciplined to Chaos, they lean heavily toward Disciplined while traders lean heavily toward Chaos.
While the daily, weekly, monthly, annual, or multi-year swoons of the stock market keep the chattering doom and gloom television personalities in business, long-term investors prepare for potential market downturns before doubts arise. They persistently align and realign their portfolio’s stock allocation within the context of both their long-term financial plan and short-term cash flow needs to ensure they have the luxury of time to recover from whatever short-term chaos may temporarily prevail.
This discipline provides long-term investors with confidence when traders are doubting. That is not to say long-term investors necessarily enjoy seeing the stock portion of their portfolios temporarily decline in value due to traders’ doubt. Indeed, I am sure they would rather skip straight to the good part when traders get their confidence back.
However, for the moment doubt and chaos have grabbed the headlines.
Our advisors spend abundant time and energy to fill our clients with powerfully positive DC (discipline/confidence) to counteract the inevitable bouts of negative DC (doubt/chaos).
We honestly do not know how long the current market swoon will last. No one does. However, periods of market volatility can either be when life-altering mistakes are made because of negative DC or opportunities are captured by positive DC.
Keep your DC positive!
Quote of the week: Benjamin Graham: “The best way to measure your investing success is not by whether you’re beating the market but by whether you’ve put in place a financial plan and a behavioral discipline that are likely to get you where you want to go.”
Securities offered through LPL Financial. Member FINRA/SIPC. Investment advice offered through IAG Wealth Partners, LLC, (IAG) a registered investment advisor and separate entity from LPL Financial.
The opinions voiced in this material are for general information only and are not intended to provide specific advice or recommendations for any individual. All performance referenced is historical and is no guarantee of future results.
Stock investing includes risks, including fluctuating prices and loss of principal.
Past performance is not guarantee of future results. All indices are unmanaged and can’t be invested in directly. The modern design of the S&P 500 stock index was first launched in1957. Performance back to 1950 incorporates the performance of the predecessor index, the S&P 90.
Any opinions are those of IAG and not necessarily those of LPL Financial. Expressions of opinion are as of this date and are subject to change without notice. This information is not intended as a solicitation or an offer to buy or sell any security referred to herein. No strategy assures success or protects against loss. Investing involves risk including loss of principal.
The economic forecasts set forth in this material may not develop as predicted and there can be no guarantee that strategies promoted will be successful.
The opinions voiced in this material are for general information only and are not intended to provide specific advice or recommendations for any individual. All performance referenced is historical and is no guarantee of future results.
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