Strong Profits Collide with the Fed, Inflation, Russia-Ukraine
Three important themes are influencing the market.
- Strong profits
- The Fed and its battle against inflation, and
- The Russia-Ukraine crisis and ensuing uncertainty
Rising profits have cushioned the downside since the beginning of the year but haven’t prevented volatility.
- Through February 18, the S&P 500 Index1 is down 9.3% from its January 3 peak, per S&P 500 data from the St. Louis Federal Reserve.
Investor’s corner—managing volatility
Avoid timing the market. It’s nearly impossible. Time in the market vs timing the market has historically built wealth.
Instead, establish a well-diversified, holistic financial plan. A diversified plan that takes your risk tolerance into account won’t eliminate the downside, but it helps manage risk and allows for upside appreciation when stocks are rising.
Rebalance over set intervals. Over time, some asset classes will outperform. Sell some of those positions and place them into the underperforming asset classes (rebalancing). This prevents you from becoming too “top heavy” in certain asset classes, which may increase overall portfolio risk.
If you have a holistic financial plan, you have chosen the narrow path. You have a roadmap to your long-term financial goals.