One philosophy of investing, as opined by Warren Buffett, is to be “fearful when others are greedy and greedy when others are fearful.”1
The nation’s eight-year bull market, however, has tested that philosophy. Most market analysts would agree that it was more important to be in the market and taking advantage of gains than to be “fearful” on the sideline.
But as 2018 moves forward, no one can predict the markets from one day to the next. A good bit of volatility has returned, relatively speaking, and many “greedy” investors may be feeling a little less confident. It’s during this late-stage business cycle that the seasoned investor is often distinguished from the seasonal investor.
Can you hold steady during performance freefalls? Moreover, can you afford to invest new money when the market is experiencing extreme fluctuation?
Those answers may lie less in your portfolio and more in your mindset and place in life. If you’re inching close to a certain financial milestone, such as retirement, it’s usually a good idea to seek to preserve assets by moving them into less volatile financial vehicles. However, if you’ve got a substantial time horizon before needing to tap your portfolio and can stomach a bit of volatility, investing when prices drop can position your money for greater opportunities for gains in the future.
Every day, we help our clients make these types of financial decisions based on their personal goals, timeline and tolerance for risk. There is no one-size-fits-all strategy for every individual. If you would like help assessing your current financial strategy against your short- and long-term goals, please give us a call.
When analyzing the economic situation for 2018, it may be helpful to study market analyst recommendations. For example, two themes Credit Suisse is focusing on in 2018 are global economic growth and the rise of the millennial generation as a major player in the workforce.2
At J.P. Morgan Chase, analysts are looking at more normalization in monetary policy in the developed world, while earnings, inflation and interest rates in the U.S. all could affect equity performance. Further, they see potential growth in international equities.3
BlackRock also is looking globally for growth, citing above-trend economic progress in Japan and emerging markets. Domestically, their strategists see outperformance in the technology and financial sectors, and cautions that inflation is poised to make a modest comeback.4
Meanwhile, Goldman Sachs Asset Management warns that investors will need to weigh the potential for more risks this year, including the possibility of interest rate hikes and escalating geopolitical developments.5
Specifically, asset managers at Columbia Threadneedle Investments cite threats from North Korea, the political situation in Saudi Arabia and conditions in Venezuela — one of the world’s largest producers of crude oil — as their biggest geopolitical concerns for 2018.6
1Adam Brownlee. Investopedia. Jan. 21, 2016. “Warren Buffett: Be Fearful When Others are Greedy.” Accessed Feb. 15, 2018.
2Credit Suisse. “Investment Outlook 2018.” Accessed Feb. 5, 2018.
3J.P. Morgan Chase. 2017. “The investment outlook for 2018.” Accessed Feb. 5, 2018.
4BlackRock. 2017. “Global Investment Outlook 2018.” Accessed Feb. 5, 2018.
5Goldman Sachs Asset Management. Dec. 4, 2017. “2018 Investment Outlook.” Accessed Feb. 5, 2018.
6Columbia Threadneedle Investments. Jan. 22, 2018. “Ted Truscott: Q&A on financial markets.” Accessed Feb. 5, 2018.