It would be an understatement to say that President Trump and his unpredictability have significantly impacted multiple sectors of our nation and world, from diplomacy to immigration to civil rights. But one affected area that has many Americans losing sleep is the markets.
What Is The “Trump Bump”?
The “Trump Bump,” which is the wave of optimism that sprang from the shocking election results in November, led to record-breaking market highs. In March, the Dow closed above 21,000 for the first time ever, and in May, the S&P 500 finally broke the 2,400 mark. As you can see from the FedPrimeRate.com graph below, the markets are soaring these days.
Summer is traditionally a soft season for stocks, yet they continue to trade at or near record highs. Even volatility has calmed and the markets appear to be ignoring the political arena for the most part. (1)
As a UPS employee, you have access to a unique and complex compensation plan. You may be wondering what, if anything, you need to do to make sure you are on the right track to reach your goals. The current record highs have led to a glut of advice on market downturns, but the markets haven’t slowed down quite yet. What should you be doing about your finances while the Trump Bump has the markets soaring?
Rebalance Your Portfolio
Markets go up and down. It’s just the reality of our economic cycle. But when the markets get overly out of whack, your asset allocation has also probably gotten a little off. The high returns that portions of your portfolio are generating are shifting your portfolio off balance, with some investments growing much faster than others.
Though it may seem counterintuitive to sell off your winners, rebalancing is a wise and commonly accepted investment strategy. You can rebalance your portfolio by selling some of your overachievers to purchase underperformers. This will keep your portfolio from having more risk than you are comfortable with. What was once only 10% of your portfolio can easily grow to 20% or 30% in a bull market like this. Readjustments may be necessary.
Don’t Get Greedy
Fight the human tendency toward greed. As we’ve already mentioned, high returns can be very tempting. Rushing after them, though, can lead you to a dangerous place where you don’t want to be!
Make a conscious effort to avoid the hype and stick to your investment plan and corresponding asset allocation. What level of risk have you determined you are comfortable with? Record highs are enticing, but don’t let them cloud your judgment and fool you into thinking you are fine with more risk than you really are. Remember, the investments that shoot up are usually the ones that drop the lowest when things reverse. By avoiding greed and rebalancing your portfolio, you will be prepared if the market goes south.
Be Prepared For A Correction
The pundits are right that the markets will correct themselves. Eventually. They are usually just wrong on the timing. It is important to recognize the reality of market cycles and prepare for the inevitable downturn.
Your portfolio isn’t the only thing you need to prepare for a bear market, though. You need to brace yourself mentally and emotionally. When the market goes up for as long as it has been, it’s easy to start taking it for granted and expect it to continue. Many people are caught off guard during market corrections and are overcome with fear and anxiety.
Don’t let your emotions get the best of you. As long as you are following sound investment principles, only investing long-term money and keeping your assets within your risk tolerance, you should have no reason to panic. Yes, things may drop momentarily. But you don’t need to lose sleep because you’re in it for the long-haul.
Touch Base With An Advisor
At ATL Global Advisors, we specialize in helping UPS employees and retirees with their comprehensive financial and retirement planning needs. If you’re not feeling as confident as we are, maybe you could use a portfolio review. We can analyze your current situation to determine whether you need to make any changes to pursue your goals and objectives. We will develop customized solutions to protect your wealth and prepare for the unknown risks associated with the market.
If you want to rest easy, email me at firstname.lastname@example.org or call 678-401-6102. We want to help you transition from where you are today to where you want to be in the future, no matter what our crazy economy does next.
Kevin Myers is a financial advisor and managing partner at ATL Global Advisors, an independent financial services firm serving transportation and logistics employees in the greater Atlanta area. With more than two decades of industry experience, he specializes in providing private wealth management services to business owners and their families, with the goal of helping them realize their financial dreams. Learn more by connecting with Kevin on LinkedIn.