Market Volatility: The Best Offense is a Good Defense

Market Volatility: The Best Offense is a Good Defense

October 29, 2018
Tom LimogesBy Tom Limoges
Trust Investment Officer

As a die-hard Minnesota Vikings Fan, I have had my share of football heartaches over the years.  Far too often, games that my beloved purple is winning, take a drastic turn for the worse as one play affects the momentum and ultimately, the outcome of the game. The team’s confidence is affected by one big play or series of small plays, resulting in a disappointing loss.

Similar to momentum in football, the financial markets rely on the confidence of investors to provide stability and growth.  When confidence wanes, volatility tends to move higher. Prices decline.  During the past month, the market’s momentum has taken a hit. This is not due to a single fumble or turnover, but is more likely due to a combination of several factors: 

  • Higher interest rates
  • Slowing global economic growth
  • More moderate corporate profit targets in 2019
  • Geopolitical concerns

The uncertainty surrounding many of these factors erased the 2018 U.S. Market gains in a matter of weeks and dipped us into correction territory (10 percent price decline from 52-week high).

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A 10 percent correction in the market is about as fun as punting the ball on offense. Yet, corrections are often short-lived and part of a normal market cycle as this chart below indicates. 

Declines vs. Returns

Where do the markets go from here?

While the factors that caused this short-term market volatility will likely persist, we believe that there are positives that will continue to push the ball down the field, such as:

•  Low unemployment
•  Improved market valuations
•  A confident U.S consumer

You may be asking yourself how you can protect your investments.  There is an old military adage that football coaches often use: “The best offense is a good defense.”  In investment management, this applies to portfolio diversification.  Keeping a mix of equity and fixed income securities can reduce volatility over the longer-term.  Like a good quarterback takes charge of the game plan to lead the team to victory, our wealth management advisors will work individually to develop the appropriate investment mix to achieve your long term goals.  Well-diversified portfolios do not provide the Hail Mary touchdown pass to win the game, but they do provide more consistent returns over the course of many seasons.

Let us talk to you about your game plan.

 For more than 135 years, SNB Wealth Management has helped individuals and families turn their plans into realities. If the markets are causing you concerns, please contact our professionals for an appointment so we can review your long term financial game plan.

About the Author

Tom Limoges

Tom Limoges is an Assistant Vice President in Investments, developing investment strategies for Security National Bank's Wealth Management Division. He holds an M.B.A. from Wayne State (Neb.) College, and has been a member of the SNB Wealth Management team since 2002.