Mitch's Mailbox

May 11th, 2022

Should Retirement Investors Sit Out This Volatile Market?

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Mark and Alison B. from Kalamazoo, MI ask: Hi Mitch, we’re sure you’re getting a ton of questions about the market volatility, but here’s one more. This level of volatility has us worried, particularly as we’re just a year into retirement. Wondering if now is a time to be on the sidelines to let things settle down a bit? Thank you for taking the time to respond.

Mitch’s Response:

Thanks for writing. Let me first say – I understand how unsettling market volatility can be, particularly when it is accompanied by worrisome headlines and a general sense of hysteria in the media. It can easily feel like something is very wrong with the stock market and the U.S. economy, which can rattle even the most experienced investors.

Since I don’t know how your retirement assets are invested and what your long-term goals are, I cannot give you advice on what changes to make in your portfolio. But I will say this: if your portfolio is allocated in a way that aligns with your investment horizon, your risk tolerance, and your retirement needs for growth and income, then I would urge you not to make any changes at all. Stay cool.

Investing During a Stock Market Plunge…What Steps Can You Take?

Volatility is at an all-time high. Recession talks are still in the air and investors are worried about their portfolios and retirement assets. So, while the market seems to be plunging, what happens to your portfolio? Your assets?

It’s common for investors to think they should time the market or exit the market out of fear. As difficult as it may seem, it’s better to remain calm and avoid rash moves. It’s easier said than done, but the actions you take right now have the greatest potential to define your financial future.

That’s why we have put together a free Black Swan Investing Playbook with insights and guidance to help you seek success when investing through these unprecedented times. If you have $500,000 or more to invest, get our free investing playbook today.

Download – The Black Swan Investing Playbook2

Every investor with the appropriate asset allocation can only reach their desired long-term goals if they stick with the asset allocation, through good times and bad. If your goals, needs, and financial situation change, then maybe your asset allocation should change too. Otherwise, it should almost always remain the same, with adjustments to the holdings and positions along the way as market conditions change.

As for the market volatility, I see the swings in the market and the selling pressure as normal and natural. In my view, the market is adjusting to changes in the inflation outlook, the interest rate outlook, the effects of the ongoing war in Ukraine, and to a lesser extent, the effects on supply chains of lockdowns in China. There’s a lot to weigh, and market volatility is a normal byproduct of changing market conditions.

But the U.S. economy remains on strong footing, in my view, and not everyone is fully appreciating it. I see that as bullish, not bearish. For example, the number of jobs available in the U.S. economy is at a record high, with nearly two open jobs for every one unemployed person. 55% of S&P 500 companies reported Q1 earnings, 80% of them have reported a positive earnings-per-share surprise and 72% have reported a positive revenue surprise. These figures are high by historical standards. Profit margins also remain quite strong for U.S. companies. Over the last 12 months, S&P 500 companies have reported a collective net profit margin of 12.18%, representing the highest after-tax corporate profits relative to GDP that have ever been recorded (records date back to the 1940s).2 This is not the stuff of recessions and bear markets, and in my view, this is a time when investors should not be selling stocks.  

So, in times like these, it is better to base your decisions on research, not emotions! Don’t sell and exit the market or wait on the sidelines out of fear.

To help you do this, we have put together a free Black Swan Investing Playbook3 with insights and guidance to help you seek success when investing through these unprecedented times. If you have $500,000 or more to invest, get our free investing playbook today. You’ll learn about seven time-tested guidelines to help you seek investing success through this historic “Black Swan” market downturn.

Disclosure

1 Zacks Investment Management reserves the right to amend the terms or rescind the free Black Swan Investing Playbook offer at any time and for any reason at its discretion.

2 FactSet. May 6, 2022.

3 Zacks Investment Management reserves the right to amend the terms or rescind the free Black Swan Investing Playbook offer at any time and for any reason at its discretion.

DISCLOSURE

Past performance is no guarantee of future results. Inherent in any investment is the potential for loss.

Zacks Investment Management, Inc. is a wholly-owned subsidiary of Zacks Investment Research. Zacks Investment Management is an independent Registered Investment Advisory firm and acts as an investment manager for individuals and institutions. Zacks Investment Research is a provider of earnings data and other financial data to institutions and to individuals.

This material is being provided for informational purposes only and nothing herein constitutes investment, legal, accounting or tax advice, or a recommendation to buy, sell or hold a security. Do not act or rely upon the information and advice given in this publication without seeking the services of competent and professional legal, tax, or accounting counsel. Publication and distribution of this article is not intended to create, and the information contained herein does not constitute, an attorney-client relationship. No recommendation or advice is being given as to whether any investment or strategy is suitable for a particular investor. It should not be assumed that any investments in securities, companies, sectors or markets identified and described were or will be profitable. All information is current as of the date of herein and is subject to change without notice. Any views or opinions expressed may not reflect those of the firm as a whole.

Any projections, targets, or estimates in this report are forward looking statements and are based on the firm’s research, analysis, and assumptions. Due to rapidly changing market conditions and the complexity of investment decisions, supplemental information and other sources may be required to make informed investment decisions based on your individual investment objectives and suitability specifications. All expressions of opinions are subject to change without notice. Clients should seek financial advice regarding the appropriateness of investing in any security or investment strategy discussed in this presentation.

Certain economic and market information contained herein has been obtained from published sources prepared by other parties. Zacks Investment Management does not assume any responsibility for the accuracy or completeness of such information. Further, no third party has assumed responsibility for independently verifying the information contained herein and accordingly no such persons make any representations with respect to the accuracy, completeness or reasonableness of the information provided herein. Unless otherwise indicated, market analysis and conclusions are based upon opinions or assumptions that Zacks Investment Management considers to be reasonable.

Any investment inherently involves a high degree of risk, beyond any specific risks discussed herein.

Returns for each strategy and the corresponding Morningstar Universe reflect the annualized returns for the periods indicated. The Morningstar Universes used for comparative analysis are constructed by Morningstar (median performance) and data is provided to Zacks by Zephyr Style Advisor. The percentile ranking for each Zacks Strategy is based on the gross comparison for Zacks Strategies vs. the indicated universe rounded up to the nearest whole percentile. Other managers included in universe by Morningstar may exhibit style drift when compared to Zacks Investment Management portfolio. Neither Zacks Investment Management nor Zacks Investment Research has any affiliation with Morningstar. Neither Zacks Investment Management nor Zacks Investment Research had any influence of the process Morningstar used to determine this ranking.

The S&P 500 Index is a well-known, unmanaged index of the prices of 500 large-company common stocks, mainly blue-chip stocks, selected by Standard & Poor’s. The S&P 500 Index assumes reinvestment of dividends but does not reflect advisory fees or other expenses. An investor cannot invest directly in this Index. The volatility of the benchmark may be materially different from the individual performance obtained by a specific investor.

The Barclays Capital U.S. Aggregate Bond Index represents the price and yield performance, before fees and expenses, of the total United States investment grade bond market. An investor cannot invest directly in an index. The volatility of the benchmark may be materially different from the individual performance obtained by a specific investor.
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