March 26, 2018

Weekly Market Commentary
March 26, 2018

The Markets

After a week like last week, ask yourself this question. Why do I invest? There are many reasons people save and invest, including to:

• Live the life they want today and in the future
• Accumulate resources so they’re prepared for any bumps in the road
• Provide an education for their children
• Offer assistance to parents
• Support a young person with a disability
• Do good in the world
• Live comfortably in retirement without anxiety

Last week, major U.S. stock indices experienced a selloff, and we saw a dramatic downturn in stock markets. The Dow Jones Industrial Average was down 5.7 percent, the Standard & Poor’s 500 index lost 6 percent, and the NASDAQ fell 6.5 percent, reported Barron’s.

Those are big moves for a single week. The kind of moves that light up the emotion centers of investors’ brains and make them want to sell.

It’s not a new phenomenon. In 2002, in an article for CNN Money, Jason Zweig explained the brain’s potentially negative influence on investment decisions, “But in the world of investing, a panicky response to a false alarm – dumping all your stocks just because the Dow is dropping – can be as costly as ignoring real danger. For one thing, it can cause you to flee the market at a low point and miss out when the market bounces back. A moment of panic can also disrupt your long-term investing strategy.”

So, what happened last week? In short:

• The Fed raised rates, as expected. The Federal Reserve raised the Fed funds rate by a quarter of a percent, which may benefit savers and investors, but will make borrowing more expensive.
• Tariffs triggered trade war worries. The Trump administration levied tariffs on China, raising concerns of a global trade war.
• You’re fired! There was additional turnover among senior advisers to President Trump.
• Can they do that? British news reported a data analytics firm has been influencing elections around the world in some unsavory ways.
• Don’t share my data! There was news a social media firm had shared the personal data of thousands with a researcher who shared it with a third-party firm without permission.
• Sigh. Another data breach. An online travel company experienced a data breach that may have exposed the personal information of 880,000 users.
• The economy is chugging along. Last week’s U.S. economic releases were overshadowed by everything else, but many indicated a strengthening economy.

That’s a lot to take in over the span of five days. The critical thing is to recognize these short-term events are unlikely to change your long-term financial goals. Your portfolio should be grounded by long-term financial goals and foundational principles of investing and not be based on the brain’s instinctive fear and flight response. I have been doing some edits and have sometimes raised some cash in some accounts as this takes place.

Focus On The Positive

“Gratitude keeps us young. It reminds us of what matters most and what matters least. Without gratitude we get old and grumpy, or even young and grumpy” –Matthew Kelly, book Resisting Happiness

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