Monday's Downturn: Investing 101
Monday’s stock market sell-off on the heels of three weeks of decline has investors asking, “what should I do?” For those with a plan, it is a great reminder that being prepared and investing in anticipation of a downturn is the best strategy to withstand these inevitable market drops.
Prepared investors maintained their exposure outside of the US despite lagging performance. Year-to-date returns through Monday for non-US stocks represented by the MSCI EAFE were +9.4% vs. -4.3% for the S&P 500 and +2.6% for US fixed income (bonds). A simply constructed Balanced portfolio including a significant allocation to the S&P 500 is positive for the year, with global portfolios faring well.
The better question is, "do I need to do anything else? " For our clients, we periodically adjust portfolios based on our outlook and the market environment. Our upcoming adjustments are aimed to provide additional inflation protection on the fixed income side and to make sure we maintain broad and balanced exposure to various equity factors.
Tax-Loss Harvesting and Rebalancing
In addition to strategy updates, downturns are always an opportunity to:
- Review portfolios for tax losses
- Rebalance to manage risk if needed, and
- Accelerate Roth conversions if appropriate.
We do not see a need to add to risk and chase “bargains” at these levels. In fact, the longer-term rise in equities may be an opportunity to de-risk portfolios slightly if your financial plan is in a stronger position after the last two years of gains.
We will continue to monitor the changing economic and market landscapes to help you stay on plan!