October 2019

What Should You Do When Markets are Running in Place?

In recent months, the markets have been running in place, showing a whole lot of movement without actually going anywhere. There has been a lot of volatility, including several steep drops and rises fueled mainly by the ongoing trade dispute between the U.S. and China. But at the close of the quarter, the markets ended up almost where they had started.

Some investors are getting spooked by the volatility and are less comforted by the tendency of the markets to make up lost ground. Part of the reason could be that investors have been spoiled by years of more or less regular growth. This is, after all, the second-longest bull market in history. Investors also realize that history shows us bull markets do not last forever. They are worried about recession and, remembering the severity of the last recession, they are nervous about when and how steep the fall might be.

If you are concerned about the markets, there are some things to remember. First, volatility is likely to continue. Trade disputes, especially with China, are ongoing. There is a lot of political uncertainty surrounding the impeachment inquiry and the coming election, and the markets don't like uncertainty. Many countries around the world are also experiencing economic challenges, which has a ripple effect on the United States.

Financial advisers sometimes joke that the ideal investor would be Rip Van Winkle -- you set up your portfolio and then, like the fictional character, you fall asleep and wake up 20 years later. That way you can't watch the movement of markets daily -- or even hourly. But most people cannot avoid looking at the movement of their portfolio and worrying.

If you are one of those people, it is important to realize that many economic fundamentals are still good. Inflation and unemployment are low, stock valuations are still reasonable, and GDP growth is positive. Those are good signs for continued growth in the economy – and in the markets.

It also is true that over time, equities have produced significantly higher returns than either bonds or cash. Even in a volatile period like this, equities overall are still showing positive returns, while bonds and money markets are flat. Of course, no one has a crystal ball to predict what will happen in the future. And everyone has a different personal financial situation, time line and comfort with risk. Only you can decide how you want to invest.

At Peachtree Investment Partners, our goal is to help you maximize your returns and minimize your stress. We are happy to talk with you about your concerns and create a plan that helps you meet your needs while being able to sleep at night.

If you choose to remain invested in equities, we believe in building a portfolio that consists of large, established U.S. companies with strong management, a competitive advantage and a long record of return on investment. We think that this approach provides the best opportunity for achieving your investment objectives.

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Garry K. Schaefer
Atlanta, Georgia
October 15, 2019

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