The market is falling. What would a good financial advisor tell you right now?

Key takeaway

  • A vicious circle: more bad news leads to more market drops, which in turn will lead to more bad news and more market drops.
  • If an economic report is worse than expected, the markets will be shocked. The numbers matter more than expectations, when there is a surprise the market is agitated.
  • For people who have been sitting in cash or waiting for the right time to enter the market, a DCA approach is great to look at right now.
  • Recency bias can hurt you, yesterday’s winner might be tomorrow’s loser, it’s not wise not to look at your wallet and assets right now.

Inflation report

The news is bad. When the news is worse than expected, it is very bad. Analysts had predicted a bad inflation report, but the actual ratio was even worse than they thought. This surprised the market and the market hates surprises. We are seeing steep declines in the early trading hours, over 800 points down on the Dow Jones.

There is a downward acceleration in the market today that feels like a frightening roller coaster crash. If you are in the market for the bass, you will have to ride it for the highs. We don’t know how long it will last and there may be more exhilarating dips in sight, but if we can sit and ride it, this will be over.

What will be the next shoe to throw away?

This could be a catalyst that arouses fear in investors and future data reports that come back with bad news and could push the market even lower. This could be the acceleration of the downward spiral into a vicious circle for this market. More bad news leads to more market dips which in turn will lead to more bad news and more market dips. The definition of a vicious circle.

Is it a buying opportunity?

The real investors among us see this fear in the market as an opportunity to buy at a discount. Things are cheaper today than they were a day ago. The concern is that you buy today and things keep getting worse. The old adage, buying in a bear market is like trying to catch falling knives. You could get hurt as long as the knives keep dropping further down the market.

If you are a long-term investor and have confidence in the viability of a particular company or index, you may be well served to buy these market dips. As the market may continue to drop further to the downside, you can continue to buy stocks at higher discounts, this approach is called the average cost of the dollar (DCA). For people who have been sitting in cash or waiting for the right time to enter the market, a DCA approach is great to look at right now.

There will be more economic calendar reports this week. We’ll see the Producer Price Index released on Wednesday, the Empire State Manufacturing Survey on Thursday along with the Census Bureau’s retail sales data. Finally on Friday we will see the Consumer Sentiment Index reported. These reports are in this week’s economic calendar and carry expectations of how bad things are, if a report is worse than expected the markets will be upset. Numbers matter more than expectations, when we are surprised, we are shocked.

Where are you in your financial stage of life?

If you are analyzing your personal financial situation with all this news, it is important to filter this market environment into your life stage.

If you are 20, keep your head down, work hard, minimize debt and invest in your investment account and 401k when the market goes down. Your time horizon is long, especially for those in their twenties planning retirement.

30 and 40 – you are more established, you are not a beginner being an adult, you try to minimize debts and increase to a maximum of 401,000 contributions. This market downturn is an opportunity for you, your time horizon is still long for retirement.

1950s and 60s – it’s real, there’s a light emerging at the end of the tunnel with the guesthouse. Try to save the most on retirement vehicles. 401k maximum and additions in IRAs. Understand your lifestyle and how much it costs, try to figure out how much income you will need for retirement, and match this necessary income to the income you will get from your retirement resources.

1970s and Beyond: Protect the flip side, you may not be buying new stocks like they used to, but income is key. If you’re good with cash flow for your daily needs, not much has changed for you today. Try to be safe and thoughtful with your investments, taxes, and wealth planning decisions.

Doing nothing is not a good answer

The past 13 years with the stock market have been a pretty glorious turn to the upside. I still remember March 9, 2009 when intraday trading on the Dow reached 6,500. That was my bottom line and I made some purchases that day. Sure, I didn’t keep them long-term and sold them too soon, but that’s a story for another day.

The salient point here is that many people have been pleased with their investments because the market has been in turmoil for over 13 years. The reality is that recent biases can hurt you and adjustments need to be made. Yesterday’s winner may be tomorrow’s loser, it’s not wise to ignore your wallet and assets right now. You have to ask the question: “What is my best next step right now, for my portfolio and my stage of life?”

There are tools that can help you, there are ways to work smarter with the way you hold your investments and make decisions. Investments are a big piece of your financial puzzle and it’s a fluid situation with this market, but also remember to consider your insurance, cash management, tax planning and wealth planning, these may not be as urgent as your investments and retirement. , but they are also important.

Keep Calm and Invest in …

Be careful not to get caught up in all the sensationalism of the headlines and the buzz of the media. Yes, the business news today was bad, it could get worse before it gets better, but you know where you are and you know where you are headed financially. These market cycles are normal and are a normal part of how an economy expands and contracts.

It is also important to have faith in the resilience of companies to find a way to satisfy a need or sell a product and make a profit. Lower valuations of your investments can be daunting, but check what you can control, find the right fit for your stage of financial life, and move on.

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