Are You Scared of a Stock Market Crash?

Thus far, 2017 has been a very solid year for the stock market. Looking back eighteen months, since mid-February 2016, the stock market has grown substantially in the midst of a series very troubling events and news.

The devastating flood in Houston, violent protests in cities and campuses across our country, North Korea becoming a nuclear power and sending a missile over Japan, and our health insurance market getting worse by the month.

The 2016 election results and related Trump hysteria has felt like a cloud for a couple years. This investigation and that resignation. Name calling and hate displacing respectful dialogue. It is very difficult for me to enjoy watching the news and (NERD ALERT!) the news has been my favorite show to watch.

With all of this, there are some constants to embrace so that you don’t think the world will end. Forever in our past and ever more in our future, optimists will be optimistic and pessimists will be pessimistic. Depending on which group you want to belong to, it seems to be easier to find like-minded people to commiserate with or be inspired by. So there’s that increase in time efficiency. The sun is still rising in the East and setting in the West. If you have kids, they still think they know more than you. If you don’t have kids, you think you know more than your parents if they are alive. If your parents have passed, you more likely recognize their wisdom.

Another constant is the unpredictability of investing and the stock market. Many clients have anxiously expressed fear about the possibility of a stock market crash in some way related to all the negative events and news. For those of you who haven’t asked but may be thinking the same thoughts, here’s my answer. Imagine this scenario. One year ago, in the middle of probably the ugliest, most negative presidential campaign ever, you had a glimpse in to the future and knew Donald Trump was going to beat Hilary Clinton and be our president. What would you have done with your investment portfolio? I’ll suggest you would have pulled significantly out of the market, if not entirely. You would likely have been convinced Trump and all the uncertainty and circus surrounding a Trump presidency would send the stock market in to a tailspin.

If that would have been your reaction, then you would have missed almost a 20% increase in the U.S. stock market. That result is not what I would have predicted last November 7th, but the result is the result. If there is now a significant pullback in the stock market, your portfolio value may still be higher than it was last November 7th. If you have any large financial obligations requiring cash liquidity in the next three years, then that money should not be in the stock market any way.

Readers, I can assure you there will be corrections and crashes in the stock market. Rest easy, don’t fret, big stock market declines are coming. However, attempting to predict when is a fool’s errand. In March of 2009, another new president had taken office two months earlier. The stock market had just declined over 50%, jobs were hemorrhaging and anemic economic numbers affected most every investment sector. This also was a difficult time to be invested in the stock market. Well the stock market had the last laugh as it approximately tripled during president Obama’s two terms despite GDP never reaching 3%, stagnant wages, new regulations, severely restricted bank lending and other economic headwinds.

Take a break from the noise! This age of easy and indiscriminate news is not correlated with the stock market. It never was. Hug your spouse, kids, friends and go for a walk. Aw heck, hug yourself. I’ve become quite the hugger since moving to the Charlotte area over ten years ago! If you have invested in yourself and have a thorough strategic financial plan, being monitored regularly, then the noise doesn’t matter anymore than short-term stock market gyrations.