2020 Mid-Year Market Review
Who would have ever expected a rebound of historic proportions in stocks?
Of course you will note in the adjacent table that the most commonly referenced diversified stock indexes have declined somewhat this year so far - and rightly so.
However, since March 23rd—the height of pandemic uncertainty—major stock indexes have advanced nearly 40%!
Make no mistake, there is still much concern and uncertainty. The pandemic is not over by any stretch and the economic fallout could continue for years to come. We are living in a truly extraordinary period of time.
Regardless, the fact that stocks have advanced so dramatically since late March is a stark reminder of how unpredictable the financial markets can be over short periods of time. Unfortunately, it is during times of extreme uncertainty and market volatility that many investors abandon a long term strategy and take actions that are fueled by fear. Time and time again, this has been a losing proposition.
What should you do?
We believe that it is especially important to develop and stick to a strategic and long term financial plan that considers the following:
Your current and projected future cash flows. How much money do you need in an emergency fund? How much should you be saving and which accounts are the most tax-efficient savings alternative? How much money do you need in the first few years of retirement and how should these earmarked funds be invested?
Individual-specific opportunities. Are there planning or investment strategies that can reduce your tax burden? When is the best time to take Social Security? Which pension option will work best for your family? Is it best to refinance or pay off your mortgage? Should you consider a Roth conversion?
Contingency planning. What are your largest financial risks? What can you do to help reduce or eliminate these risks? Are there cost-effective solutions that can provide you with a more stable financial future?
Planning for the next generation. Are your assets in the best position to benefit your children, heirs or favorite charities? What is the most tax-efficient alternative to ensure your children or grandchildren are on firm financial footing?
After more than 25 years of working with clients, there is no doubt that financial planning is the single most effective “action” one can take to create the peace of mind necessary to approach market downturns and economic uncertainty with confidence. We hope that you stay well, stay safe and have a nice summer!