After an early morning green chart yesterday, the indexes got smoked again. The NASDAQ is now down about 28% on the year. Over the last 10 years if you had my job and simply invested in AAPL, AMZN, FB, GOOG, and NFLX you were a genius. How about now? You’re an idiot. Those tickers are down anywhere from 22% to 72% year-to-date. With the exception of Netflix, I still believe strongly in those names, the question now becomes how long until they can right the ship. If you read my last blog I used a boxing analogy to describe this year’s correction. Nothing has really changed. Mayweather is still picking us apart.
The one thing I have seen this week is some stabilization come to the bond markets. In what is usually a safe haven for investors during tough times, the bond market has also let us down to the tune of double digit losses throughout the year, to go along with low yields. While the Fed’s decision to raise rates has been a large chunk of the concern regarding growth stocks, there may be some value in finding higher yields and bond market stability moving forward.
Times like these lead to so many click-bait headlines and the main thing that I despise in financial media is a one-size fits all mentality. There are people on TV that spout off about what is correct and what’s not correct when it comes to your finances without ever having met you. I won’t name names but one of them rhymes with Boozy Gorman. If this market has been a wake-up call to what your true risk tolerance is, there are tools out there to remove yourself from the market in an effort to round out your portfolio better. Annuities work as you get closer to retirement. Cash value life insurance works. Why? Because it’s simply a transfer of risk. I am bringing in a 3rd party to remove market risk and age risk. What’s the trade off? If the S&P rises 28% will your insurance products keep up? Absolutely not. However, when the market is down over 20% is that trade off for a fixed return or a 0% floor worth it? Yes, it looks like the greatest investment in the world.
Now let me be very clear, I am never proposing that your financial life should all be sent to one spot. There is no magic bullet in this world. But every tool in the shed has a reason. And that’s not to say that if you don’t have the products mentioned that adjustments haven’t been made in your portfolio. At Birds Eye, clients who are few years from retirement have had some short term investments added so we make sure the first couple years of income are covered. Clients in retirement have had withdrawal strategies adjusted to draw from the most advantageous areas of the market. Taxable accounts are looked at daily for tax loss harvesting opportunities to add capital loss write-offs at year-end. Younger clients who have many years in front of them may consider adding more growth equity to take advantage of the current discount. It’s the perfect time to adhere to the old adage of be greedy when others are fearful.
The reality is this. The markets have been in chaos this year. What has worked in the recent past is not working so far this year. It’s been difficult to find moves that aren’t just for the sake of doing something. One thing I have talked about recently is that I find a lot of us back where we started on Jan. 1st of last year. We still have plenty of time left for this year to move into a more positive framework. Hopefully when we look back on this time period it’s a blip you will barely notice on a 20 year chart. As I said before, financial “experts” who have never met you have no idea what they are talking about as it relates to your plan. Everyone is unique and I’m still here with cell phone in hand ready to chat and find solutions that my clients are comfortable with. We can use this time as a learning experience to truly gauge risk, timelines and your INDIVIDUAL plan … because 1 size fits all planning simply doesn’t work.