By Amanda Compton
Last Wednesday, Sept. 21, the Federal Reserve announced a third consecutive 0.75 percentage point rate increase in another attempt to cool inflation. Markets responded and the Dow dropped more than 500 points to close at a new low for 2022.
With market instability can come worry and a bit of confusion, especially with the rallies of early August. Because we expect volatility to persist at least through the rest of 2022, Fox Financial Group has been employing the following strategies to protect client portfolios:
Those who are not retiring anytime soon and have long-term goals
You have no reason to worry. Historically speaking, stocks recover and those positioned for growth tend to grow significantly. The graph below shows recessions and recoveries dating back to the 1980s. As shown, despite the downturns, stocks have experienced incredible growth over the past 20 years.
These kinds are markets can be a gift to younger investors. This is a good time to get into stocks that were once too expensive. Then when the market bounces back, you make money.
For retirees or those nearing their retirement years
Fox Financial Group has been strategically raising cash off stocks that continue to do well despite market instability. "What many don’t realize is that not all stocks are in the red," said FFG Wealth Manager Jay Fox, CFP®. "Those that are in the green we use to build cash reserves to get our clients through these rough patches. We are essentially taking what the market has given us while waiting on other stocks to heal."
A recent article by Burton G. Malkiel in the Wall Street Journal describes the strategy this way: “Low-expense-ratio mutual funds and exchange-traded funds of dividend growth stocks are the appropriate equity vehicle to provide both liquidity and inflation protection for those living off retirement savings.”
Things to Remember
Market volatility and corrections are a part of investing. This fact must be kept in perspective as we seek to be wise investors. Or as Malkiel notes, “Savvy Investors can navigate a Goldilocks or stagflation economy and emerge with portfolios that are, at the very least, unscathed."
“Investment advisory services are offered through Mutual Advisors, LLC DBA Fox Financial Group, a SEC registered investment adviser. Past performance is no guarantee of future results, and all investing involves risk. The views expressed are those of Fox Financial Group and do not necessarily reflect the views of Mutual Advisors, LLC or any of its affiliates.”