DisasterJanuary 16, 2019 -
Categorized in: IAG News
The aftermath of a natural disaster is ugly. We have all seen the pictures of flooded homes, burned vehicles, and scattered debris. People’s lives and property are disrupted and destroyed by forces beyond their control.
Whether it is an earthquake, tornado, hurricane, or wild fire, the first steps in recovery are stabilizing the surviving people and property, assessing the damage, and then taking the small steps necessary to heal and return to “normal.”
While paling in comparison to the human suffering from a natural disaster, financial markets experience the same phenomena. December 2018 was a human-made disaster for the stock market. During what is normally the happiest time of the year sellers outnumbered buyers by a wide margin.
Thus far in 2019 traders are in the midst of their disaster recovery process. For the time being they seem to have stabilized the stock market, but we don’t know if there will be some additional aftershocks in the coming days.
The psychological harm from December will likely take some time to heal in traders’ minds. The real and present danger of potential significant short-term losses looms larger after such a disaster. They see danger instead of opportunity in every economic report or chart.
By taking small steps forward, traders will likely regain their full confidence over time. If history is any guide, they will likely become overconfident at some point which will lead to yet another human-made disaster.
That is the cycle of the markets. It is inevitable, unavoidable, and completely natural.
Our disciplined GPS investment and financial planning process helps our clients put such common unpredictable human-made disasters in the perspective of their family’s long-term financial plan.
Having the perspective and confidence to look beyond traders’ attention spans to the eventual recovery can help you make better decisions during occasional disasters.
Quote of the week: John Scully: “The future belongs to those who see possibilities before they become obvious.”
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.
Past performance is no guarantee of future performance. In fact, the opposite can be true. The information contained in this report does not purport to be a complete description of the securities, markets, or development referred to in this material. Investing involves risk including loss of principal.
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.