The Top Three Questions Our Clients are Asking Right Now
Answered in Three Sentences
By: Steven Higgins, Financial Advisor, Principal
This year is BY FAR the most unique I have experienced as a financial advisor in almost two decades in this role. One thing I’ve realized over the years is while each individual and family is very special and unique in their own treasured way, the concerns our clients face and questions they ponder are not dissimilar. In this week’s post I thought I’d address what seems to be the most common questions my partner Allison Schmidt and I are hearing from our clients right now. The questions, while consistent, are well-founded and logical and reflect a harmony of concerns that we as advisors need to address. So in respect of your time, here are the answers to these questions in three sentences.
Question: With the catastrophic economic statistics being reported on a regular basis, how can the stock market ignore all of this bad news and press higher toward record highs?
Answer: The economic data, while bad, is nowhere near the fear-inducing projections that dominated the headlines last March. Economic data is a look backwards and the stock market is a pricing mechanism that looks forward. This pandemic environment has favored large companies over small companies and large companies drive the returns of the stock market indexes.
Question: The stock market has been pressing higher and higher since the spring, shouldn’t we expect a correction or increased volatility especially with the election coming up?
Answer: Stock market corrections of 10% or more come along on average more often than New Years Eve and 20% corrections are more frequent than Leap Years. So, at any given point-in-time, we are on the cusp of a correction; especially in THIS election year. However, despite everything we have endured: impeachment, pandemic, shutdown, recession, and bear market, the S&P 500 is up 21% over the last 12 months. Corrections are normal and we have a process to navigate them.
Question: Don’t you think if (Insert presidential candidate’s name here) wins the election the stock market will crash?
Answer: While presidential elections evoke many emotions in Americans, the effect of election outcomes prove to have little effect on stock market returns. In 2008 there was no shortage of pundits declaring the President Obama victory would lead to the end of prosperity and of course the other side of the aisle felt the same way about President Trump’s 2016 election. Both sets of talking heads were proved painfully wrong and the only mistake an investor with long term goals could have made was to not be invested.
Financial Data: YCharts
The opinions voiced in this material are for general information only and are not intended to provide specific advice or recommendations for any individual. All performance referenced is historical and is no guarantee of recommendations for any individual. All performance referenced is historical and is no guarantee of future results. The opinions expressed in this material do not necessarily reflect the views of LPL Financial. The economic forecasts set forth in this material may not develop as predicted and there can be no guarantee that strategies promoted will be successful. There is no guarantee that a diversified portfolio will enhance overall returns or outperform a non-diversified portfolio. Diversification does not protect against market risk. All investing, including stocks, involves risk including loss of principal. Bonds are subject to market and interest rate risk if sold prior to maturity. Bond values will decline as interest rates rise and bonds are subject to availability and change in price. The Dow Jones Industrial Average is comprised of 30 stocks that are major factors in their industries and widely held by individuals and institutional investors. The S&P 500 is a stock market index that tracks the 500 most widely held stocks on the New York Stock Exchange or NASDAQ. All indices are unmanaged and may not be invested into directly. Any named entity, HD Wealth Strategies, and LPL Financial are not affiliated. This information is not intended to be a substitute for specific individualized advice.
