Market Update
Markets continue to look for bottoms, with major indexes having dropped by several percentage points since the end of the year. It appears that the following factors are weighing on markets:
- Middle East tensions, especially between Saudi Arabia and Iran;
- Reports that North Korea may have detonated a nuclear device;
- Daily routs in Chinese shares; and
- Continued softness in oil prices.
Markets likely will not bottom until all market players have been able to do all the selling they wish, and so-called circuit breakers prevent this from happening, exacerbating each day’s volatility. All of the factors above are set against a backdrop of a Federal Reserve that has begun a rate-hiking campaign, although one it insists will be cautious and gradual. That is not helping.
I would strongly caution against trying to discern what, exactly, is driving markets one direction or another, despite the continued tendency of the media to do so. Certainly investor emotion, also known as sentiment, is always a major factor, but it’s not possible to divine the motives of millions of investors’ and speculators’ trades and sum them up in one, slick sound bite.
Our counsel is for you to focus on your long-term goals and portfolio allocations. Use times of heightened volatility like these to gauge your risk tolerance in real time. If you’re having a difficult time sleeping, it’s probably time to revisit your portfolio allocations, in light of your goals.
Graig P. Stettner, CFA, CMT
Financial Advisor & Partner
Strategence Capital