After a very difficult ending to 2018, the markets made a large recovery to start 2019. In fact, the 13.1% return for the S&P 500 Index was the best quarterly return since the third quarter of 2009, and the best first quarter since 1998. The big momentum change actually started at the end of 2018 with a combination of optimism that the US and China would reach an agreement to avoid a trade war along with comments from the Federal Reserve that future interest rate increases may be less aggressive than anticipated. Since a trade agreement between the US and China is still pending...
We were happy to see 2018 end on an uptick for the stock market after the return of volatility and some harsh reminders about negative returns. The fourth quarter had down months in both October and December, resulting in all of the major equity markets reaching “correction” territory which is defined as a return of negative 10%. We also saw other parts of the market reach a “bear market” which is defined as a negative return of 20%. It is important to note that market corrections are normal, expected, and factored into the long-term plans we design for clients. However, that knowledge doesn’t make it any easier to handle headlines about record market drops or concerns about what might happen next.
We have been talking to a lot of clients about ethical and impact investing lately. Opportunities to align investment dollars with personal values have become more available as investor demand has increased. It is now possible to effectively make investments that focus on the environment, sustainability, workplace disparities, or gender equality. In fact, from 2014 to 2016 these types of investments grew by more than 33%. The desire to align personal values with spending dollars has already been demonstrated in consumer spending, as 66% of consumers now saying they’re willing to pay more for sustainable goods (a 55% increase from 2014). [i] People are not only buying with the environment in mind, but they are also investing in companies that promote social themes as well.
For investors, it can be easy to feel overwhelmed by the relentless stream of news about markets. The right financial advisor can play a vital role in keeping you focused on what really matters. Watch this informative video from Dimensional Fund Advisors to learn more about the value that a financial advisor can bring to your investment experience.
An important aspect of the Flourish investment philosophy is to help our clients find the right portfolio for them. We use a variety of tools to help clients identify their risk tolerance, then match that up with their long-term financial goals to build a customized investment solution.
The following article by Dave Goetsch, Executive Producer of “The Big Bang Theory”, provides helpful perspective about the importance of staying focused on long-term goals instead of reacting to short-term market movements. This is an important concept to connect with because big market changes can affect us emotionally and psychologically. Mr. Goetsch does a nice job of summarizing his connection with market performance without using investment jargon.