Dear Garden State Trust:
Yikes! What happened to the stock market last fall? Should I be getting out of the market now?
—Dizzy and worried
The economy remains sound. The labor market is strong, unemployment is low, retail sales were generally up during the holiday season. We may have had GDP growth of 3% or more in 2018—if so, it would be the first time in over a decade. Few economists are predicting a recession in 2019, which suggests staying in the market.
Having said that, stock prices have become more volatile. In December they were rocked by uncertainties over the effect of tariffs on global trade, the consequence of another interest rate bump from the Fed, and the ongoing polarization of national politics. Price/earnings ratios of some companies have been quite high by historic standards. Few market observers are predicting a reduction in market volatility.
If increased stock price volatility is keeping you up at night, then yes, perhaps you should consider a change in investment strategy. Portfolios may be structured to reduce the risk of loss. But the tradeoff is a lower upside opportunity. It all depends upon your time horizon and your risk tolerance.
Before you make any move, a consultation with an investment professional, such as ourselves, about your holdings and your investment goals would be a good idea.
Do you have a question concerning wealth management or trusts? Send your inquiry to firstname.lastname@example.org
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