Midsummer Night’s Market
The good old days, when politicians were civil and worked together, market risk was null, and stock market volatility was low
Timely views and timeless advice on investing and planning from Thompson Wealth Management, Ltd.
June 24, 2016
I have no doubt the markets will process Brexit over ensuing days and weeks, and there will be additional volatility related to the announcement. But it will take years for Britain to actually exit the EU, plenty of time for businesses and markets to adapt.
Stocks continue rebound from January funk, but bonds flat in May. Our view on market valuations and likely returns. The important dimension of inflation.
Take this to the bank. If indeed we are in a moderate return environment, then the margin for error is smaller, and it is more important than ever to invest in index funds, keep costs low, and to avoid both inertia and opportunity costs associated with active management.
The trade deficit has become a political football leaving many with the perhaps misguided notion that our trade deficit with countries like China and Mexico makes us a loser. As with many things economic, it ain't that simple. Arm yourself with the facts:
Experts and pundits are notoriously bad at forecasting, in part because they aren't punished for bad predictions. Also, they tend to be deeply unscientific. Moreover, most of us engage in constant forecasting without even realizing it, and that can have an important impact on the way we think about investments. This podcast from Freakonomics Radio will help you rethink the subconscious ways in which we all take forecasting risk. The psychologist Philip Tetlock is finally turning prediction into a science -- and now even you could become a super forecaster.
The fiduciary rule will help to ensure that financial institutions act in investors’ best interests when providing retirement advice.
Do you understand what diversification does for your portfolio? While people generally know diversification is a good thing, they’re often not sure exactly how or why. Academic research has shown that investors don’t understand diversification's impact on volatility and expected returns.
Sharp increases or decreases in the stock market may have a lower impact on your financial plan than you think. Sometimes when you lose in one aspect of your plan, you gain in another. That’s the “Even Steven” concept.