Friday, November 30, 2012

When Markets Become Volatile, Keep Things in Perspective

When the stock market becomes more volatile, it can be easy to lose perspective.  Guard against allowing your emotions to drive your investment decisions!  In just the past few months, we’ve seen pessimism return to the markets – first with uncertainty surrounding the elections and now with concerns over the fiscal cliff.  As a result, the S&P 500 index declined by 8% from September 10 to November 15.  Now in the past two weeks it has risen by 4%.  This type of roller-coaster ride can be unnerving for some investors.  We continue to believe that Congress will come up with a solution to the fiscal cliff – the biggest question is when.  Thus, as uncertainty continues to plague the markets, remember that markets never move higher in a straight line.  Since February 2009, the S&P 500 index has fallen by more than 5% in six different months, but it has also risen by more than 5% in ten different months, and is up over 100% since its March 2009 low.  We expect market volatility to continue until there is compromise in Washington on future tax policy and spending cuts; therefore, it will be important for investors to stay balanced and not panic in the face of choppy markets.