Overall, this has been a strange year in the stock market. We've set records for the amount of time gone without any drops in stocks. No one’s complaining, but it’s not normal and you shouldn’t expect it to continue. This week was a great reminder of that.
In the last week the market has gone up and down in a way we haven’t seen in awhile.
In the last week the market has gone up and down in a way we haven’t seen in awhile. Thursday, stocks shot up. This was mostly due to the expectation and optimism of the tax plan being passed. Then, on Friday, as Michael Flynn pleaded guilty, it dropped from the anticipated turmoil in the White House. It rose again on Saturday as the tax plan was passed and the market settled.
You may have whiplash, but here’s what you should have learn from this week. It’s easy to forget how quickly it can pivot, especially when you look back at the great year we’ve been having. We’d like to think the market is based on statistics, but it’s more like my 2 year old: reactive. This week has taught many the danger of assuming the pattern we’ve seen this year is the new normal.
This is especially dangerous if you’re getting close to retirement. Many clients I talk to don’t think they can fall into this trap, but most I meet with are aggressive in their investments because of the lack of volatility in the market. This can be dangerous if we hit another drop sometime soon. It’s important that you don’t be conservative in your investments, but take smart risks.