As we have seen during the debt ceiling debate, the stock market experienced losses and volatility. Conversely, bond prices have steadily risen during this time. Late Friday, Standard & Poors downgraded the credit rating of the United States. This will most likely add additional pressure on the equity markets in the short term. The impact on the long term is unknown at this time. However, this downgrading may actually be a benefit because it will force the politicians to take this situation more seriously and be more vigilant about our debt. We need them to face this problem head on with conviction.
Investing in equities takes patience and, in some cases, a strong will. While these times are trying, removing your investments in a down market can result in losses and also can accelerate the downward direction of the market. On the plus side, a down market can provide opportunities for gains. It can be challenging to resist the temptation to sell low and buy high.
We do not want our clients to worry about their money. We have tried to assist our clients in knowing their risk tolerance and have structured individual portfolios to match that.
At this point, we are not advising clients to sell their equities. We expect additional short term volatility, but feel that stocks play an important long term role in a mixed and risk managed portfolio.
Please do not hesitate to contact us with any questions you may have.
Thank you.
The debt ceiling debate is something technical that very few people actually understand. Did you know that the US has actually had three instances when it could have defaulted on its obligations? This happened in 1790, 1933 and 1971. It seems like lawmakers are using the debt limit to force the administration to accept significant spending cuts. There is a terrific article in the Washington Post that explains this debate and sheds some light on a different view of the situation.