Ups and Downs in Skiing and the Markets

We just got back from a ski trip to Killington, VT.  While I greatly enjoyed spending time with the family, it again revealed my up and down relationship with skiing.  I love being outdoors, especially in the mountains.  I love the exercise and the fresh air.  I don’t love the lift lines, food lines, bathroom lines, or bar lines. 

Killington, VT – Natalie O’Neill

Many years ago, when I was living in the Bay Area, I met up with an East Coast friend to ski in Telluride. Neither of us had been there before but had heard great things about the town and it’s skiing.  The reports were spot on.  The town was beautiful, and the skiing was outstanding.   For those who enjoy the snow and mountains, Telluride should be on your bucket list.

At the time, snowboarding was starting to take-off, so we decided to give it a shot.  We rented the equipment near our condo and walked to the in-town lift.  The lift led to a trail that coursed its way to the main facilities and the main lifts.  Unfortunately for us, it was a blue trail and not the beginner trail we should have been on.  After falling repeatedly, I had one epic yard sale.  My friend described me as “helicoptering” through the air.  It literally knocked change out of my pocket.  It also knocked the lift pass off my jacket.

I went to a remote lift ticket hut to get a replacement pass.  The customer service person called down to the main office to see what to do.  The CS rep spoke to someone on the other line and went silent as he listened to a question.  As the query ended, the rep looked at me up and down.  With snow and ice on my face and clothes, his response was: “Oh yeah, he has been boarding.” We went back to skiing the next day.

To say 2018 has been an up and down year for the market could be the ultimate understatement.  Wide swings have come almost daily in December.  As of this writing, most indices look to post negative returns for the year.   With one trading day to finish out the year, the S&P 500 is off 7% and the Dow is off 6.7%. 

Typically, negative returns in the markets are in anticipation of a recession.  At this stage, indicators of a looming recession are not there.  We are not seeing rising unemployment or steep drops in corporate profits.  Consumer spending has not slumped.  And Oil hasn’t found its bottom. 

It’s the belief of many experts (and I tend to agree) that the volatility we are seeing reflects wariness about trade discussions with China and the threatened tariffs.  The markets abhor uncertainty and it is still unclear how negotiations will pan out.  If a more concrete trade agreement is finalized, we may see more stability.

The other major factor is Federal Reserve hikes in the Federal Funds rate this year.  The pumping of the brakes has caused some anxiety since we have been in such a low rate market for so long.  Some question whether the Fed has been too aggressive and overshot the target.  That remains to be seen.  A slower increase pace in 2019 may be the exact approach needed.  Fed’s guidance for next year is a move from the current 2.5% to 3.0%.  Usually done in .25% increments means only 2 rate increases for the year.  We’ll see if the Fed has finally figured out how to balance increases. 

What does all this mean for investors?  For long term investors it should mean very little.  Trying to time the markets is often a recipe for disaster.  Picking the highest high to sell and the lowest low to buy is virtually impossible.  An investor may be succeed doing this on occasion, but like most gamblers they often lose in the end. 

Instead, investors should take stock of their situation.  Add a financial check-up resolution to your 2019 list:  Has your overall goal changed? Has your timing changed?  Have you experienced a life event that requires re-allocation? Has your risk profile changed? 

With life spans easily reaching into the nineties most investors need growth in their portfolios.  That means you need to be in the market.  The key is to have a balanced portfolio, allocated to suit your risk portfolio, that is regularly re-balanced to maintain proper allocation targets in a cost-efficient manner. 

If you are doing all that, congratulations, you will likely achieve your goals.  If you are not and want some help, contact me for an open “no sales pressure” discussion. 

Happy New Year everyone! I wish you a happy, prosperous, productive year of joy.

Please feel free to share with others and make suggestions for future articles: peter.oneill@fiduciamwealth.com