This is serious!
For the past several weeks, I have been suggesting that you take a closer look at your investments, and adjust your holdings in stocks to reflect the gains you've made in this long bull market.
In a column posted here on August 1st, titled "What About the Stock Market" I posed the question: "Will you feel worse if you sell now, and the market goes higher -- or will you be more emotionally devastated if you hang on and the market falls?"
Now you're about to find out!
In that column, I suggested that there is no one answer to the questions -- and a lot depends on your age and stage in life. Those who are still working, contributing to a retirement plan, have history on their side. There has never been a 20 year losing period for a diversified portfolio of large company American stocks (S&P 500),with dividends reinvested.
But for those approaching of in retirement, that 20-year time horizon shrinks -- especially since you can't take advantage of lower prices in a bear market to keep accumulating stocks in your retirement plan.
Moment of Truth
So don't bury your head in the sand. Today, Friday, the market appears likely to continue its downtrend -- although a wave of bargain seeking may appear toward the close. Or, not. Don't be paralyzed by the inter-day headlines. Keep your eye on the big picture -- your own financial security.
As I write this before the opening, the S&P 500 has just turned slightly negative for the year. But it is still up hugely from the bottom in March, 2009. So you still have profits.
This is time to make a decision. But don't move in haste. And don't be "all in or all out." Think about balance. You will need the growth that having some equities will provide during a long period of retirement.
Keep the headlines in perspective. Selling in a panic, is what makes bottoms -- and headlines about big market declines help create panics!
The Economic Reality
There is real economic news behind the market headlines. China's growth slowed sharply according to a report out last night. Again perspective is required: instead of growing at 7 percent, they're only growing at 5 percent. Still, that was enough to create more fears of a global economic slowdown.
Greece's prime minister resigned --but Germany has won steep economic concessions, and that drama now fades from center stage for a while.
Meanwhile, currencies around the world have fallen sharply against the dollar -- as central banks "print" money to keep the cost of their exports competitively cheap, and as scared money runs to the U.S. dollar.
That limits the Fed's ability to raise interest rates in the next few weeks -- as higher rates here would increase desire for dollars, pushing the dollar higher. That would make our exports more expensive -- cutting into American companies' profits, and jobs here at home. And that's not good for stocks.
Stop, Look, and Listen
Remember that old warning from childhood? This is the moment to take it to heart. And that's The Savage Truth.