We are looking at the highest inflation rate in 40 years and the near certainty of rising interest rates. These stories and others will undoubtedly generate sensational headlines. Sensational news stories cause volatility because the market is always assessing the news. The more news we get, the more uncertainty we get. In times of uncertainty, investors get emotional. Emotional investors overreact. Extreme volatility leads clients to abandon discipline and make poor financial decisions. Your role is to make sure that never happens to your clients. And that’s the whole point of this story.
We can’t hide from volatility and we can’t keep disrupting our plans by continuously running to the sidelines under emotional duress. Clients need order in their lives. Give them that order by taking them right back to basics. Between now and the time they reach their goals, the stock market will go up and down. It won’t go up and up; and it won’t go down and down. As always, it will go up and down. Bull markets are followed by bear markets and bear markets are followed by bull markets. All things pass, even volatile markets. Over time, down markets, even bear markets, are fender-benders.
Yes, ships are safer in port, but ships are built to weather the storm.
Don Connelly is co-founder of Don Connelly & Associates.