So, today I have decided to add the Blog section back to our website. Why, you might ask?

It’s easy, because the DOW just dropped over 1,000 points in one day. The markets had a tough sell off today with the major indices falling more than 3%.

In one day!

Essentially, wiping out the gains for 2020 (although this isn’t the first time that the markets have wiped out the gains for the year).

What is going on!?!?!?

No one would blame you for asking that question.

However, the answer doesn’t really matter. The news media will try to convince you that it was “fear” of the Cornoavirus spreading to Italy and Iran over the weekend. I actually believe the Cornoavirus is partially to blame, but I believe (and this is not a political statement) that the market “fears” the Nevada results over the weekend.

The results showing that Bernie Sanders is the front runner for the Democratic party. Normally, the markets would just shrug off a socialist getting the nomination of the Democratic party. But the markets remember about four years ago when they thought there was no way a real estate mogul who used to host a game show could be selected by the Republicans.

So, as politics go, no one knows what might happen. And that brings me to my point!

Markets hate uncertainty!

So, the answer to today’s question does not matter. All you need to know is there was uncertainty baked into the markets today. And uncertainty leads to fear and fear leads to selling. Today, a lot of it!

There’s an old adage that the markets cycle between “fear” and “greed”. I believe that there is a component of this cycle that no one likes to talk about. That in between “fear” and “greed” lies “hope”.

And I believe that is where we are so far this year. Stuck in the “hope” cycle. You know when we are in this cycle as you hear things like, “I hope this selloff stops soon” (fear) or “I hope the markets continue to go up” (greed).

Coming off a phenomenal year, when the stock markets were up over 30%, I think have been in the “hope” it goes up category. Until today. The conversation changed to, “I hope this is a short sell off”.

And all of this up and down in the market this year is actually normal for an election year. Volatility tends to increase in the third year of a presidential cycle. Although, I am a little surprised that is occurring this early. But, as I mentioned earlier, it’s the uncertainty that causes the selloff.

So let me offer some “hand holding” at this point. (That’s the terms we advisers use when we need to “talk clients off the ledge”). To all of the users of our Plan Confidence advice service please rest assured . . .

1) We started with diversifying your money (which is required by law in ERISA accounts like 401k plans). Using diversification to manage risk is called “Strategic” investing. We have never recommended that you put all of your money in one asset class or fund. Our models range from 100% bonds to 100% stocks. And we diversify the stock and bond portions within each of the five models (100% Fixed Income, Conservative, Moderate, Aggressive and 100% Equity).

2) We let you know every quarter how to re-balance your portfolio. This is done to manage risk. If you start out with a portfolio of 50% stocks and 50% bonds because that fits your risk tolerance, then you will want to re-balance periodically back to the 50/50 allocation, as this is in line with the level of risk you want to take. So, if the stock markets sell off for a quarter, we will sell off some of the bonds and purchase stocks to get you back to the 50/50 level.

3) We also offer another level of “protection” against prolonged volatility with our “semi-tactical” models. These models start with the same allocation of the Strategic models. However, at any time, you might be told to sell your stock holdings and move them to cash. This is to protect from prolonged market drops. The only problem we have is, we never know if we are in a short or long market sell off until after we are done (hindsight is 20/20). So, if you are using this strategy, we are currently monitoring the charts every single day for “buy”, “hold” or “sell” signals. Be sure to watch your email during this volatile period in case the “sell” signals out weigh the “buy” signals for an extended period of time.

Yes, the DOW did drop 1,000 points today. However, only time will tell if this is a short term “fear” cycle due to uncertainty. Or, if this is the “beginning of the end” of the greatest bull market we have ever seen!

But either way, be sure to check back here periodically (or sign up for our monthly emails) . As I have made a commitment to keep you informed!

Plan Confidently my friends!

-Kevin