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Market Uncertainty: Strategies for Success

When considering the post-tax reform economy and market uncertainty, there are a few aspects to keep in mind in terms of financial planning and what you can do to help your investment portfolio. Where is the market headed and where should your focus be?

What is the state of the market?

According to the Chicago Board Options Exchange (CBOE), market volatility is back.

Sources: CBOE, FactSet, J.P. Morgan Asset Management. Stock market returns are based on calendar year peak to trough declines experienced during VIX spike, except for J.P. Morgan acquires Bear Steams, which is a based on the calendar year peak to the acquisition date. Average is based on the period shown from 12/31/2006 - 3/31/2018. Guide to the Markets - U.S. Data are as of March 31, 2018.

Will this affect the housing market in California?

Here in California, Orange County and LA County are already showing signs of overheating. But the national housing demand should stay strong through 2019 as pent-up demand enters the buyers market with historically low inventories. However, we believe that as federal interest rates increase, it will have a less profound impact on mortgage rates.

How can we prepare investment portfolios for uncertainty in the market?

If we are headed toward a bear market overall, it’s a good reminder that uncertainty can create problems or opportunities. A key point is to remember to plan ahead and be prepared as much as you can. Other steps you can take:

  • Don’t liquidate! Only sell shares if you absolutely need the cash at the moment. It’s a better idea to consider rebalancing your portfolio.
  • If you have large cash reserves, consider small purchases as the markets continue to fall.
  • Review cash flow models to confirm you will have enough liquidity to get through the storm.
  • Look for tax planning opportunities such as Roth conversions or tax loss harvesting – just make sure to do a thorough analysis because Roth recharacterizations are no longer allowed under the new tax laws!

Where should my focus be when considering market uncertainty?

Although market uncertainty can scare investors, focusing on personal objectives can make the process easier. Remember, an index isn’t a measure of your personal portfolio. It won’t always move in sync with any single market or index – and it’s a good idea to focus on what your portfolio is doing, regardless of what the market is doing.

Your portfolio is different than everyone else’s. It should be based on your personal goals, risk tolerance, and time horizon.

In summary:

If you have concerns about market uncertainty and want to know how it might affect your investment portfolio, contact Chatterton & Associates today. Our team of advisors will help you plan and check your overall financial health. Review your portfolio risk and discuss strategies for short- and long-term financial success!


Chatterton & Associates

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