Investing

Don’t Let Stock Market Volatility Shake Up Your Investing Strategy, Too

We won’t sugarcoat it: It’s been a rough August. So far, we’ve seen actual threats of nuclear war, violent clashes in Charlottesville, Virginia, terror attacks in Spain and Finland—and more political shakeups in D.C. The gravity of these recent news events has weighed on the spirits of many, and on the stock market.

What happened with stocks?

Unsurprisingly, nuclear threats, terror attacks and political upheaval have been a drag on the market. The Dow Jones industrial average, a benchmark often used to represent overall market performance, has fallen more than 1.7 percent over the last couple of weeks. And on Thursday, August 17, the market had its worst day in three months.

What happened?

After what many considered a weak response to the violence in Charlottesville over the weekend, President Donald Trump is apparently losing appeal among corporate leaders and former political supporters. And that raises questions about his ability to get the pro-business pieces of his agenda enacted (think increased infrastructure spending and cuts in taxes).

On August 14, the CEOs of Intel, Merck & Co. and Under Armour resigned from the president’s Manufacturing Jobs Initiative, a business advisory council. Two days later, a dozen CEOs dialed in for a conference call and decided to disband the Strategic & Policy Forum, the economic advisory panel to the president, along with the manufacturing council. (Soon after, that he was ending the groups.)

Rumors that former Goldman Sachs executive Gary Cohn was considering stepping down as National Economic Council Director pushed stocks down further. (The White House has denied he’s planning to leave.) The actual dismissal mid-Friday of Trump’s controversial chief strategist Steve Bannon lifted stocks slightly. But the market was still down for the week.

What does all this mean for my portfolio?

These are topsy-turvy times, and no one can guess what comes next. “The recent market move is a reminder that markets don't always go up” in the short term, says Certified Financial Planner Taylor Schulte.

The goods news is: Historically, stock prices have always recovered and continued to rise.

If short-term volatility keeps you up at night, you may consider moving to a more conservative portfolio with more bonds, which are more stable but typically offer lower returns, and fewer stocks.

But stocks offer the most growth potential over the long run. So, as long as you put together a well-diversified portfolio that meets your goals, you can take a deep breath during times like these and carry on with your investing strategy as planned—regardless of what's leading the news tomorrow. “The best portfolio is a portfolio you can hang onto through good markets and bad,” Schulte says.

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