On September 16, 2021, Sand Hill CIO Brenda Vingiello, CFA joined the CNBC Halftime Report panel once again and discussed what positive catalysts investors canread more
Staying Calm in the Volatile Markets
There really is nothing quite like price to change investor sentiment. Year after year, short-term traders make emotional decisions at the wrong moments, either fearfully selling as markets come under extreme pressure or eagerly buying after markets reflect overly optimistic outcomes. From the stock market melt-up at the start of 2018 to a near melt-down at year’s end, too many individual investors reacted emotionally, abandoning their financial plans under duress and doing serious harm to their long-term financial possibilities.
While always painful in the moment, it is important to remember that volatility is typically a short-term phenomenon measured in days, weeks and sometimes months. Experienced investors, and those who counsel them, use times like these as opportunities to routinely rebalance portfolios, as well as upgrade the quality of their portfolios, selling any poor performers and replacing them with more attractive investments that have become devalued themselves. It is also a great time to create value through tax-loss harvesting and, for those who are still contributing to their wealth, periods of declining prices can be an opportunity to buy assets after they’ve gone “on sale”.
Most importantly though, it is critical to filter out the noise during turbulent times and make informed and rational decisions rather than fall prey to the often overwhelming herd mentality. This task is complicated by the fact that most media coverage during market downdrafts is inherently characterized by end-of-the-world rhetoric and reporting, even though actual underlying economic conditions rarely change with the same speed and severity as their talking points imply. Our own house view is that there are few indications that the economic cycle is coming to an end. Granted, the market is in the process of digesting slowing economic growth from an above-trend 3% rate back to a more modest 2% growth rate in the coming year. While a legitimate concern, short-term traders oscillated between euphoria and despondency last year, conflating normal slowing economic activity with recessionary conditions, when the reality wasn’t nearly as binary as those eye-catching headlines suggested.
Make no mistake, we fully realize how important it is to always understand where we are in the economic cycle and to invest accordingly. It is also important to acknowledge that our fundamental assessment doesn’t preclude the possibility of more dramatic market movements ahead as investors and traders alike attempt to extrapolate (and often over extrapolate) the latest economic and corporate news. But during drawdowns, it’s imperative not to head to the sidelines and wait for the issues of the moment to clear. Particularly, when historically every downturn has been followed by a recovery and a new market high for the patient, long-term investor.
That is why your asset allocation has been structured to be consistent with your unique circumstances and built to get through the occasional volatile periods. While diversified portfolios don’t guarantee profits or provide assurances that investments won’t decline in value, having confidence in your financial plan does create the opportunity to lean into market volatility when emotions are running high. After all, the real world is rarely as dire as the price action and sentiment of the moment can make you feel. But having confidence in your long-term financial plan can help you stay calm when others panic – and that is perhaps the strongest competitive advantage you have in volatile markets.
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All video presentations discuss certain investment products and/or securities and are being provided for informational purposes only, and should not be considered, and is not, investment, financial planning, tax or legal advice; nor is it a recommendation to buy or sell any securities. Investing in securities involves varying degrees of risk, and there can be no assurance that any specific investment will be profitable or suitable for a particular client’s financial situation or risk tolerance. Past performance is not a guarantee of future returns. Individual performance results will vary. The opinions expressed in the video reflect Sand Hill Global Advisor’s (“SHGA”) or Brenda Vingiello’s (as applicable) views as of the date of the video. Such views are subject to change at any point without notice. Any comments, opinions, or recommendations made by any host or other guest not affiliated with SHGA in this video do not necessarily reflect the views of SHGA, and non-SHGA persons appearing in this video do not fall under the supervisory purview of SHGA. You should not treat any opinion expressed by SHGA or Ms. Vingiello as a specific inducement to make a particular investment or follow a particular strategy, but only as an expression of general opinion. Nothing presented herein is or is intended to constitute investment advice, and no investment decision should be made based solely on any information provided on this video. There is a risk of loss from an investment in securities, including the risk of loss of principal. Neither SHGA nor Ms. Vingiello guarantees any specific outcome or profit. Any forward-looking statements or forecasts contained in the video are based on assumptions and actual results may vary from any such statements or forecasts. SHGA or one of its employees may have a position in the securities discussed and may purchase or sell such securities from time to time. Some of the information in this video has been obtained from third party sources. While SHGA believes such third-party information is reliable, SHGA does not guarantee its accuracy, timeliness or completeness. SHGA encourages you to consult with a professional financial advisor prior to making any investment decision.