Recent world events have many investors on edge, particularly those who are waiting for the market to drop due to our longer than normal expansion over the last nearly eleven years. I’ve been telling clients for the last few years that the real political issue facing investors is not China, but rather Iran. Now it appears that these issues are materializing. The question is however, is this a unique situation, and if not, where have we seen it before and what were the results for investors?
Fortunately, we have seen many instances of a larger political turmoil event that we can draw some conclusions from. Understand, every event is different, but the overall outcomes rarely are. In recent years alone, we have seen a trade war with China, Brexit, the collapse of the Greek economy, and hyperinflation in Venezuela. In the less recent past, we faced the oil embargo, Vietnam, and the Korean War to name a few. This is really important to remember when the next crisis comes, and we all think “yeah, but this time it’s different.” No phrase in the history of investing has burned more investors than that one. The exact reason isn’t what’s important, it’s the markets consistent pattern of recovery following whatever the cause of the decline was.
During times of conflict the market has often shown strong resiliency. Unfortunately, our emotions don’t always follow suit. Be very careful not to get caught up in political rhetoric or one-sided views. The markets can and will recover from stressors over time.
So what types of investments do well in times of turmoil? Often it depends on the nature of what caused the drop, but a few of the more obvious are U.S. treasuries, for their perceived safety; gold, for its lack of correlation to equity markets; and energy stocks, particularly oil stocks in this current crisis. Defense stocks in war-related crises, managed futures and long-short funds have also performed well in times of strife. In the end, however, I would caution investors not to get too caught up in what’s happening today, but rather what has been happening and might continue to happen in the future. For present day U.S. investors, that is a very strong economy and favorable market conditions barring an all-out catastrophe. If we believe that to hold true in the immediate future, then we really shouldn’t change our overall investment strategy.
My suggestion would be to speak with your advisor and confirm that your investments are in line with your goals. If so, no changes may be required. If you’re a little out of balance then now may be a good time to review your risk tolerance and adjust your portfolio accordingly.
T. Eric Reich, CIMA, CFP, CLU, ChFC is president and founder of Reich Asset Management and can be reached at 609-486-5073 or firstname.lastname@example.org.
Securities offered through Kestra Investment Services, LLC (Kestra IS), member FINRA/SIPC. Investment advisory services offered through Kestra Advisory Services, LLC (Kestra AS), an affiliate of Kestra IS. Reich Asset Management, LLC is not affiliated with Kestra IS or Kestra AS. The opinions expressed in this commentary are those of the author and may not necessarily reflect those held by Kestra Investment Services, LLC or Kestra Advisory Services, LLC. This is for general information only and is not intended to provide specific investment advice or recommendations for any individual. It is suggested that you consult your financial professional, attorney, or tax advisor with regard to your individual situation.