Portfolio and Market
Just a few closing thoughts for this week in a post-Brexit world.
The S&P 500 was down -3.59% for the day. Its largest one-day percentage decline since Aug 24, 2015. This leaves the S&P 500, considering the reinvestment of dividends, flat for the year. Although no one really knows exactly how the Brexit situation will play out in the markets, the near term uncertainty has investors in a tizzy.
One thing to keep in mind though is that historically, U.S. stocks have always gone up… eventually. Sure, stocks have days, months, years and sometimes decades when they do not increase. But over the long term, no matter what else is going on in the world, stocks have increased. The following is a chart of the stock market returns over the last 140+ years. Embedded in that chart are recessions, a Great Depression, assassination attempts on presidents, wars, natural disasters, and many stock market crashes. Yet, the needle keeps going up, up and up over the long run.
The question to ask yourself in the short term is, is any of your money you have invested directly in stocks needed by you and your family within the next five years? If not, the turmoil in the market should offer a buying opportunity for you, not the trigger to sell or panic. Your five year money should be in other asset classes like cash (SHY), long term bonds (BLV), and maybe gold (GLD). All of those asset classes were positive today.
Readers of this blog likely know I run three portfolios for clients. A concentrated stock portfolio, a portfolio of ETF positions in the equity market, and a portfolio of ETF positions in the cash/bond/commodity markets. As of today, year-to-date they are down about -9% (versus up +39% in 2015), up about +1%, and up about +6% respectively. I have my clients’ wealth management allocated to each portfolio based on their individual circumstances. Thus, today’s events, and any future events like them should do little to affect the long term plans of my clients.
Disclosure: I and the clients of Brick Financial Management owned shares in SHY as of this writing.