Webster’s defines inflection as a turning or bending away from a course or position of alignment. Take a look at the chart and note two of the previous inflection points in the chart. The first occurred after a 106% increase in the S&P 500 and resulted in a 40% loss. The second occurred after a 101% increase in the S&P 500 and resulted in a 57% loss. With the latest 137% increase in the S&P 500, are we at another inflection point, or will it just keep going up and up and up?
One answer is that nothing goes up forever – to which many scoff and say, “When it does go down… it always comes back”. The problem if you are in retirement or near retirement is that the next recovery may not be as quick as the last two, leaving you with far less retirement assets to navigate your retirement.
Here are current political, economic, and market-related situations that could influence another inflection:
- The S&P 500 lost nearly 5% of its value in August;
- Last Friday, one of the main market indicators reversed to a negative direction because 6% of stocks on the NYSE moved to a Sell signal;
- Short-term indicators have turned negative;
- The market is at an all-time high;
- The government reports that they will hit their debt ceiling next month, and a worst-case scenario is default;
- We are facing possible military action against Syria;
- Gold and oil are both moving higher;
- September is historically the worst month for the market;
- The Federal Reserve has hinted that QEII tapering may begin soon;
Does all of the above mean that you should move out of the market completely? Probably not. Everyone has a different tolerance for risk, and some asset classes and funds will hold up better in a decline than others. However, any one or combination of these of these could produce a significant drop in the market. Since no one knows for sure, it is important to have a plan in place that will mitigate loss and work to preserve your hard-earned retirement assets. If you do not have a risk management strategy in place, you should seek an advisor who does.
This writing is for informational purposes only and does not constitute an offer to sell, a solicitation to buy, or a recommendation regarding any securities transaction, or as an offer to provide advisory or other services by Capital Retirement Planning, LLC in any jurisdiction in which such offer, solicitation, purchase or sale would be unlawful under the securities laws of such jurisdiction. The information contained in this writing should not be construed as financial or investment advice on any subject matter. Capital Retirement Planning, LLC expressly disclaims all liability in respect to actions taken based on any or all of the information on this writing.