Carrigg Wealth Advisors

OK….so now what?

 

After falling -34% in just 23 trading days, the S&P 500 is now roughly half way back to the record high reached in early February. No one knows what lies ahead for the planet, never mind the market, in a Shelter-in-Place, Covid-19 world, but here are a few thoughts:
 
1. Cash Reserves – If you don’t have 6-12 months of committed expenses in cash, short term CDs or money market, consider planning for it.  No one knows how long this rally will last and you don’t want to be forced to sell if we have another large downturn. This is particularly important if your income has been, or might be, interrupted. And to be clear, I mean pure old cash – the kind earning around 0% right now.  Bonds and bond funds are also important but right now I am talking about pure, simple, cash deposits. 
 
2. Right size your expenses – If your household is anything like mine, the difference between discretionary and non-discretionary spending has never been clearer.  Of course, I am not saying we should keep up this shelter in place, only the bare essentials, mentality. I do think many of us can benefit from cutting down on some unnecessary expenses; especially people living mostly or entirely on their portfolio.  
 
And perhaps most importantly,
 
3. Be prepared – The recent pullback of over 20% in the S&P 500 and Dow Jones Industrial Average, technically put us in a “bear market.”  While it is possible the worst is behind us, the average bear market lasts over a year and the average “years of gain” lost in the S&P 500 is 3.2 years. Source: Richard Bernstein Advisors LLC  Anything could happen but this would suggest we may have a lot longer and lower to go in the market. There are typically several “bear market rallies” of over 10% even when the larger trend is still down.  So, unfortunately, the recent rally does not necessarily mean the worst is behind us. The previous two bear markets lasted 30 and 17 months, respectively. Source: Richard Bernstein Advisors LLC   
 
No matter what lies ahead, I would suggest committing to riding out the ups and downs.  If, however, the last 6 weeks have you convinced that your risk profile needs updating, now might be the time to lighten up on stocks.  
 
I am also suggesting many clients keep some cash on the sidelines in their investment accounts to be able to buy if the bottom once again falls out on the market.  This is in addition to cash reserves for committed expenses.  Having cash in your portfolio during a market sell off serves two roles:
 
1. It cushions the blow as the cash balance doesn’t go down in a sell off.
 
2. It gives you some “dry powder” to try to add to your portfolio.
 
As always, we are here to help. If we can answer any questions or give you a second opinion on your portfolio, please don’t hesitate to get in touch.
 
Be safe and be prepared.
 
Robert F. Carrigg, Jr., CFP®
rob.carrigg@stewardpartners.com
603-427-8840
 
 

Investors should carefully consider the investment objectives, risks, charges and expenses of mutual funds before investing. The prospectus and summary prospectus contains this and other information about mutual funds. The prospectus and summary prospectus is available from your financial advisor and should be read carefully before investing.

 

An investment in the Fund is not insured or guaranteed by the Federal Deposit Insurance Corporation or any other government agency. Although the Fund seeks to preserve the value of your investment at $1.00 per share, it is possible to lose money by investing in the Fund. Individual investor’s results will vary. Past performance does not guarantee future results.

 

This material is being provided for information purposes only. Any information is not a complete summary or statement of all available data necessary for making an investment decision and does not constitute a recommendation. There is no guarantee that these statements, opinions or forecasts provided herein will prove to be correct. Investing involves risk and you may incur a profit or a loss regardless of strategy selected. Prior to making an investment decision, please consult with your financial advisor about your individual situation.

 

ANY OPINIONS ARE THOSE OF ROB CARRIGG, JR., CFP® AND NOT NECESSARILY THOSE OF RAYMOND JAMES. STEWARD PARTNERS GLOBAL ADVISORY LLC AND THE CARRIGG WEALTH MANAGEMENT GROUP MAINTAIN A SEPARATE PROFESSIONAL BUSINESS RELATIONSHIP WITH, AND OUR REGISTERED PROFESSIONALS OFFER SECURITIES THROUGH, RAYMOND JAMES FINANCIAL SERVICES, INC. MEMBER FINRA/SIPC. INVESTMENT ADVISORY SERVICES OFFERED THROUGH STEWARD PARTNERS INVESTMENT ADVISORY LLC.

 

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.  

 

The S&P 500 is an unmanaged index of 500 widely held stocks that is generally considered representative of the US stock market. The Dow Jones Industrial Average (DJIA), commonly know as “The Dow”, is an index representing 30 stocks of companies maintained and reviewed by the editors o the Wall Street Journal. Keep in mind that individuals cannot invest directly in any index, and index performance does not include transaction costs or other fees, which will affect actual investment performance. 

 

Suzuki, Dan “Anatomy of a Bear Market.” RBA Quick Insights, March 16, 2020

Adtrax 3038261