Emotions in Times of Volatility

in Market Commentary by

Following last week’s 5.2% decline, which was one of the worst weeks we’ve seen for two years, the Dow, S&P, and Nasdaq are up 4% for the week and posted the best weekly gain we’ve seen since 2013. Housing starts rose 9.7% in January, passing analyst expectations. All eyes are on Washington D.C. late Friday with the Mueller indictments.

Weekly Returns

S&P 500: 2,732.22 (+4.28%)
FTSE All-World ex-US: (+3.67%)
US 10 Year Treasury Yield: 2.87% (+1.4%)
Gold: $1,347 (+2.3%)
EUR/USD: $1.24 (+1.6%)

Major Events

  • Monday – The Trump administration proposes $4.4 trillion budget for fiscal year 2019
  • Tuesday – U.S. stocks rise ahead of key inflation report
  • Wednesday – Cisco brings $67 billion to the United States after new tax law
  • Thursday – U.S. mortgage rates hit highest since 2014
  • Friday – Mueller indicts 13 Russians, three companies over 2016 election

Our Take

The stock markets have had six straight days of positive returns to claw back from last week’s increase in volatility and drop in values to correction territory. During the 10 previous sessions, the S&P has posted eight moves greater than 1%. As perspective, it took all of 2017 to see eight 1% moves. Although we haven’t seen volatility like this for a while, it is normal. It’s worth remembering that none of the fundamental drivers of the stock market have changed that much.

Staying focused on a long-term plan with clear goals is the best way to navigate what could sometimes be an emotional rollercoaster. Emotions are neither good nor bad; however, they cannot be avoided and they are often enhanced when it has to do with money and life savings. It’s natural to have an emotional reaction to money and volatility, but decision making based on emotions is how investors end up negatively impacting their future.

The last two weeks are a good reminder of how volatile the markets can be over short or long periods of time. Although we don’t know what next week will bring, how we react to volatility is what we as investors can control.

A great way to better manage emotional reactions when it comes to your finances is to know where you’re going. The Personal Capital Retirement Planner will do just that by helping keep track of your holistic financial picture. Just as importantly, it will help keep the focus on the long-term path to your financial goals, which leads to better decision making.

Speaking of decisions, we hope you decide to enjoy the President’s Day holiday with family and friends.

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Amin Dabit, CFP®

Amin Dabit, CFP®

Amin Dabit is the Director of Advisor Services with Personal Capital. Along with the EVP of Advisory, Amin helps lead Personal Capital’s financial planning experience and advice. Amin brings over a dozen years of experience in private wealth management and financial planning. Amin works with the advisory team to identify and establish strategies for reaching clients' financial goals by providing comprehensive, customized financial advice designed to improve their financial lives.

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