If you followed the markets at all last year, you know that it was one of record highs. The Dow closed the year over 24,000 and the S&P 500 reached a high of over 2,700. (1) And then there’s the fact that we’ve experienced the second-longest bull market since 1929. But 2018 hasn’t seen the same success. The S&P 500 ended the first quarter down 1.17% and volatility has been a major headline. While there’s no predicting what the market will do, and unexpected global and political events can throw a wrench into market cycles, here’s a big picture look at what the markets might do in the second half of 2018.
A Growing U.S. Economy
First, a snapshot of the economy as a whole. With consecutive quarters of over 2% GDP growth and a prediction of another year of 2-3% growth, (2) the economy is still going strong. Add to that the fact that unemployment is still near record lows and jobs are being added at a healthy rate, (3) and the outlook for 2018 is far from dismal. Inflation is expected to rise to a 2.6% rate (4) and the Feds will most likely raise interest rates to 2% through three separate hikes. (5) Oil costs are expected to increase and U.S. manufacturing is forecast to grow at a higher rate than the rest of the economy. The housing market will most likely stay strong, with new starts and a low existing housing inventory. Trump’s recent tax reforms are also expected to give the economy a short-term boost.
All of this leads to 52% of Americans predicting that 2018 will be a year of economic prosperity. (6)
Most authorities on the subject believe that the rest of this year will follow the bullish trend, although not to the extreme of 2017. So far, we’ve seen a correction and a rally but not much growth over 2017 returns. In fact, 41% of investors believe that stock prices will likely remain unchanged for the next 6 months. (7) This past year gave us uninterrupted global monthly growth, which is unlikely to occur again. Volatility is also expected to stick around.
While 2018 started off with a Thomson Reuters’ 2018 S&P earnings forecast of growth of over 11%, (8) now experts are saying it could end the year at 8% growth or lower. (9) Even skeptics see the market staying stable. They warn against expecting sizable returns, but say that the markets will hold close to current levels. (10)
This is good news, right? Yes, but predictions are just that. There is no guarantee that the markets will fall in line with what the most knowledgeable experts forecast. There is plenty of optimism, but what can happen with high expectations is drastic pullbacks when markets drop or the economy experiences a setback.
How It Affects You
As always, tried-and-true financial principles will serve you well, no matter what predictions come true. Whether experiencing ups or downs, stay disciplined and focused. Avoid emotional investing and the temptation to chase returns. Adhere to these time-tested principles as you prepare your finances for 2018:
Start with a Firm Foundation
Work with a financial professional to create a custom strategy that takes into account your short-term needs, long-term goals, risk tolerance and more. At ATL Global Advisors, we use our in-depth analysis of your situation to identify the ideal mix of asset classes for your portfolio. We use various diversification and allocation strategies which strive to minimize your risk exposure while helping maximize your wealth.
Have a Long-Term Perspective
The markets are always changing. If you check your portfolio performance every time there’s a shift in the markets, you will end up feeling overwhelmed and stressed. If you maintain a long-term perspective and stay disciplined in your approach, especially if you’re more than ten years away from retirement, you can feel confident in your plan.
Maintain Proper Asset Allocation
Your portfolio should be reviewed annually to ensure that it still reflects your appropriate level of risk. If it doesn’t, you may need to rebalance to keep your portfolio on the right track. Rebalancing consistently is one of the most proactive measures an investor can take to help preserve their wealth.
Know the Facts
Knowledge is essential for making informed decisions. Avoid falling prey to the media, which tends to exaggerate. Instead, stick to the information you’ve gleaned from your financial professional and what you know about your personal risk tolerance and goals.
A Final Word
The only long-term guarantee in investing is that there will be short-term fluctuations. We’ll experience bear and bull markets in the decades ahead just as we have in the past decades. As we enter into the second half of this year, take the steps necessary to set your finances up for success. At ATL Global Advisors, we are dedicated to helping you take command of your wealth. Email me at firstname.lastname@example.org or call 404-303-9994 or click here to book your free introductory meeting and finish the year off strong!
*The views stated in this letter are not necessarily the opinion of Cetera Advisors LLC and should not be construed directly or indirectly as an offer to buy or sell any securities mentioned herein. Due to volatility within the markets mentioned, opinions are subject to change with or without notice. Information is based on sources believed to be reliable; however, their accuracy or completeness cannot be guaranteed.
*Investors cannot invest directly in indexes. The performance of any index is not indicative of the performance of any investment and does not take into account the effects of inflation and the fees and expenses associated with investing.
Gary Lutrick, MBA, RFC is a financial advisor and partner at ATL Global Advisors, an independent financial services firm serving transportation and logistics employees in the greater Atlanta area. Along with nearly 30 years of industry experience, he holds an MBA in finance and the Registered Financial Consultant (RFC) certification. He focuses on helping his clients plan for retirement, manage risk, and define financial objectives that integrate their family values. Learn more by connecting with Gary on LinkedIn.