Don’t Sell on Headlines

Posted August 15, 2017

So far, the world markets seem to be shrugging off the saber-rattling coming from North Korea and the U.S. White House. The smart money is betting that the distant but suddenly headline-grabbing possibility of the first conflict between two countries armed with nuclear weapons will amount to a tempest in a teapot; perhaps we are already seeing evidence of that this week.

The U.S. stock market has been testing new highs for months, and experts cannot quite explain why valuations have been rising amid such low volatility. So the question is quite logical: isn’t this a good time to pare back or get out of the market until valuations return to their historical norms, or at least until the North Korean “crisis” blows over?

The quick answer is that there’s never a good time to try to time the market.  The longer answer is that this may actually be a particularly bad time to try it.

 What’s happening between the U.S. and Korea is admittedly unprecedented.  In the past, the U.S. largely ignored the bluster and empty threats coming out of the tiny, dirt-poor Communist regime, and believe it or not, that also seems to be what the military is doing now as the U.S. military seems to be responding with a yawn.  There are no Naval carrier groups anywhere near Korea at the moment; the U.S.S. Carl Vinson and the U.S.S. Theodore Roosevelt are both still engaged in training exercises off the U.S. West Coast, and the U.S.S. Nimitz is currently patrolling the Persian Gulf.  The State Department hasn’t called for the evacuation of non-essential personnel from South Korea, as it would if it believed that tensions were leading toward a military confrontation.

Meanwhile, on the home front, the U.S. economy continues to grow slowly but steadily, and in the second quarter 72.2% of companies in the S&P 500 index have reported earnings above forecast.

Putting this all together, what does it mean?  History has given all of us many opportunities to panic, going back to World War I and World War II, and more recently 9/11—but those who stayed the course reaped enormous benefits from those who abandoned their stock positions.  If you’re feeling some panic over the North Korean situation, by all means, go in the nearest bedroom and scream—and then share some sympathy for the people living in the island territory of Guam, which is in the direct path of the North Korean bluster.  Just don’t sabotage your financial well-being in the process by selling in a panic. If you have any questions on your portfolio and how it is positioned for market events like this please give us a call.

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