This quote from founding father, Thomas Paine, comes to mind when the market goes on a decline like we’ve experienced the past few days.
To state the obvious, companies and traders are upset by the expected effect of new tariffs on the American business community, as well as the world at large. As usual, we can only guess at the long-term implications for the equity markets, but we’re confident that they will eventually rebound.
For most investors, the fine details are irrelevant; market downturns cause a sinking feeling in the pit of the stomach. The simplest way to get rid of this feeling is to sell everything to avoid further declines. But if you are a long-term investor, which most of us are, this is precisely the wrong thing to do.
The difficulty, if you choose to bow out of the market, is you also need to know when to return. In order for this maneuver to succeed, you have to know 1.) that the market will continue to decline, 2) how far it will fall, 3) how long the decline will last and 4) when the inevitable recovery will begin. That’s a tall order and there’s not a long list of successful people who have gotten all four right. Markets have always rebounded from these sorts of events and since no one has ever figured out how to reinvest at the correct time it’s best to stay the course for the long term returns that the markets have always provided.
The markets have been very generous the last few years, and the markets tend to take back some of their generosity from time to time.
One way or another, the American economy will get through this period, and the trade war, like all wars, will end. Please don’t let emotions rule your financial decisions and call us if you’d like to talk. We’re happy to provide advice and counsel.