“April Showers bring May flowers.” Sorry, not this year in the stock market. The S&P 500 fell more than 6% in May, a reminder of last December’s plunge of 9%. Currently, we have the same trade war brewing with China, and Mexico was just added to the fray. But this new alarm should not scare you away from your long-term investment plan. Unlike last December, this time the story is different.
The VIX (CBOE Volatility Index), aka the “fear gauge”, is not behaving feverishly now as it was last Christmas. In fact, it is acting as cool as winter. Why is it so calm? In two words: interest rates. The Federal Reserve Board has changed their tune since the end of 2018. Instead of raising interest rates, many investors expect cutbacks this year. If true, your accounts should recover from May and begin running up again.
A recent study of the most affluent people produced these six behaviors, “wealth factors”, related to net worth potential: 1. Frugality, or a commitment to saving, spending and budgeting; 2. Confidence in financial management and investing; 3. Responsibility, which is accepting your role in outcomes and believing luck plays only a small part; 4. Planning, or setting financial goals; 5. Focus, on seeing tasks to their completion without distraction; and 6. Social indifference, or not succumbing to social pressure to buy the latest thing.[1]
When you view your May statements, try to stay cool. One day or one month will not determine your long-term financial future. In last December’s “dip”, the S&P 500 fell to 2400. It only took until this April for the index to turnaround and hit new highs of 2954.
Fraud and Privacy: With so much elder fraud and privacy issues around us, please be sure that you have a “trusted contact person” listed on your accounts. Please contact us for an update.
Thank you to so many of you who have sent new clients our way this year. Also, I greatly appreciate your compliments on my book “Money Stories”. It seems to be achieving its goals: to educate and to entertain.
Mitch Fisher
[1] Business Insider 2/11/19