Its May And We Haven't Gone Away
By Jay L. Gershman
Not a day goes by without a client mentioning that they heard recently that the stock market was going to drop soon. I always have to hold myself back from saying what is on the tip of my tongue and give a balanced well thought out answer. The reality is the market is overdue for a correction, so therefore it is likely at some point, and soon would seem like a reasonable assumption. However, soon has been the prediction for the past few years and many investors I meet have missed a lot of return waiting for prices to fall. Even our philosophy of reducing risk between April 15 and May 1 is based on the long held belief and statistics that indicate corrections are increasingly likely from May until a peak in October of each year. Yet, we have not performed our annual “strategic rebalance” as of today.
Why? There are many reasons but the most obvious are related to market resilience and finding investment alternatives that are preferable. To the first point, the same scene has played out over the past three years, a market that appears to be ready to correct, only to recover to establish new highs. The second question might be more valid. If you sell, what do you buy that has a better opportunity to grow long term or have less downside risk? Our answer is nothing to speak of. Lastly, investors need to consider an intermediate to long term time horizon when making changes. For us, while a correction does appear likely, we don’t see many reasons why most money managers won’t use a correction as an opportunity to increase equity positions and with it, prices may ultimately be higher.
However, it will be of utmost importance to remind investors who are considering retirement or projecting extraordinary cash needs to remove needed liquid funds from the stock market. It is never wise to try to wait for the best price or some magical moment to set aside funds needed soon. Stay tuned and enjoy the summer!
Jay Gershman is an Accredited Investment Fiduciary and Registered Life Planner. This information is the opinion of the author and not intended as specific recommendation. Please consult a professional before making changes. Securities offered through Securities Service Network, Inc. Member: FINRA/SIPC. Advisory Services offered through SSN Advisory, Inc. Registered Investment Advisor.