The market is an emotional beast. It has always been susceptible to severe mood swings, like Dr. Jekyll and Mr. Hyde. The Dr. Jekyll market is very analytical. It is focused on each particular company’s prospects for the future. Are earnings growing? By how much? Is competition going to benefit or harm the company? Is the company developing new products and services? The Dr. Jekyll market efficiently guides stock prices over time to their proper valuations based on empirical data.
The Mr. Hyde market is turbulent with fits and is driven by issues that influence the overall economy. Mr. Hyde is focused on the crisis at hand. He likes to react to every news story. Sometimes his reaction is misguided and almost all the time he overreacts.
We think it’s safe to say, we are presently in a Mr. Hyde market.
As frightening as the problems are today, Mr. Hyde can present an opportunity. The Mr. Hyde market stirs up all the work Dr. Jekyll created. Some companies get their stock prices unreasonably slashed and some rightfully so. Other companies find temporarily increased sales. Others will innovate new products that may save our lives or make them better.
So, how and should one grasp the opportunity? First and foremost, we at W3 certainly could not know this crisis was coming, but we planned for one showing up at some point. All our clients engage in the use of diversified portfolios. Not because they are exciting, but because in the long run, diversification is the best defense against Mr. Hyde*. Over-exposure to any particular asset can often end badly. Maintaining your diversified portfolio geared towards your goals, especially during extreme volatility has proven successful over history; we see no reason this time is different*.
That said, during times of Dr. Hyde, it is reasonable to stay the course with your overall investment objectives. You may even see during these times, if your portfolio is actively managed, managers of these accounts will continue to buy and sell. They are working on neutralizing the short-term volatility within the overall equity market.
As always, and especially now during times that can make it tough to be a long-term investor, we as Certified Financial Planners ™ are here to help. During extreme market conditions it can be a comfort to have a trusted advisor to ask questions of and bounce ideas off. A Dr. Jekyll mindset can help one stay the course through rough waters to reach your goals.
The material contained in this letter is for informational purpose only and is not intended to provide specific advice or recommendations for any individual nor does it take into account the particular investment objectives, financial situation or needs of individual investors. Past performance is not an indication of future results. Diversification cannot assure a profit or guarantee against a loss.
The opinions expressed in this article are those of author and should not be construed as specific investment advice. All information is believed to be from reliable sources, however, no representation is made to its completeness or accuracy. All economic and performance information is historical and not indicative of future results. Any tax advice contained herein is of a general nature. Further, you should seek specific tax advice from your tax professional before pursuing any idea contemplated herein.
Fee-Based Planning offered through W3 Wealth Advisors, LLC – a State Registered Investment Advisor – Third Party Money Management offered through Valmark Advisers, Inc. a SEC Registered Investment Advisor – Securities offered through Valmark Securities, Inc. Member FINRA, SIPC – 130 Springside Drive, Suite 300 Akron, Ohio 44333-2431 * 1-800-765-5201 – W3 Wealth Management, LLC and W3 Wealth Advisors, LLC are separate entities from Valmark Securities, Inc. and Valmark Advisers, Inc.
Certified Financial Planner Board of Standards Inc. (CFP Board) owns the certification marks CFP®, CERTIFIED FINANCIAL PLANNER™, CFP® (with plaque design), and CFP® (with flame design) in the U.S., which it authorizes use of by individuals who successfully complete CFP Board’s initial and ongoing certification requirements.