The United States and global stock markets all experienced a sharp decline over the past three trading days. This has been the result of concerns that the bull market of the past seven years may be slowing down and economic policy in the United States and abroad is changing and could also slow growth in the short term.
I have been expecting a decline in the stock markets for some time now, and this may be the beginning of such a period. All of your portfolios are invested in a diversified manner, and include both stocks and bonds, so that you will not be overly-affected when the stock market does go down. I am not recommending anyone sell out of their equity positions at this time. The most prudent investor response to volatility like this is to rebalance your portfolio back into it.
My recommendation over the past year has been to wait until the stock markets dropped 10% from their highest levels before buying any more equities. We have reached this target and I am now recommending a shift of 5% from money market and short term bond positions into broad based stock index mutual funds.
It has been a long time since we have seen a down stock market, and this is a reminder that they do not always go up. Your best defense is to remain balanced in your portfolio and to re-allocate when the movements become significant. If you have any concerns or questions, please feel free to contact us.