{"id":1083,"date":"2014-05-28T13:47:26","date_gmt":"2014-05-28T13:47:26","guid":{"rendered":"http:\/\/vhfinancialmanagement.com\/?p=1083"},"modified":"2014-05-28T16:10:20","modified_gmt":"2014-05-28T16:10:20","slug":"same-song-different-verse","status":"publish","type":"post","link":"https:\/\/vhfinancialmanagement.com\/2014\/05\/28\/same-song-different-verse","title":{"rendered":"Same Song Different Verse"},"content":{"rendered":"
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The stock market set several record highs recently, but does the economy support this stock market growth?\u00a0 I’ve been contemplating this question for a couple weeks, and after having several conversations with clients I think I have an answer.<\/p>\n

Let\u2019s first start with the numbers and some facts.\u00a0 On Tuesday, May 13, 2014, the S&P 500 briefly rose above the 1900 mark, which is a lifetime high for that index.\u00a0 Contrast that info with the Q1 Gross domestic Product (GDP) growth of just 0.1%. This is down from 2.6% in Q4. Also throw into the equation continued high unemployment numbers, a large debt burden, international instability and political uncertainty.\u00a0 Sounds troubling, huh?\u00a0 But, we\u2019ve heard this song before. This all sounds similar to the talking points discussed in early 2013. Same song\u2026different verse.<\/p>\n

Is this the new paradigm in which we are living? One in which market growth doesn’t need to be supported by economic stability.\u00a0\u00a0 Who knows?<\/p>\n

There are many economists out there who opine on the topic, and many I don\u2019t see much differently than those who use diving rods to find water\u2026.sometimes they are right( or lucky). But it is not so important whether or not anyone is right or wrong.\u00a0 The importance is how you handle the situation.<\/p>\n

My answer is simple: I don\u2019t know if the economy can support the market, and I don\u2019t know if the market needs the economy for support at this point\u2026\u2026I just don\u2019t know. Again, who knows?<\/p>\n

What to do?<\/p>\n

So whether you feel the market is overvalued or undervalued, it simply doesn’t matter.\u00a0 What matters is how you handle your personal portfolio and financial affairs.\u00a0 Trying to guess the market\u2019s next move based on economic forecasting and market valuation can get very dangerous\u2026..essentially, it\u2019s market timing.\u00a0 As you know, I am not a fan of market timing.<\/p>\n

Remember the most important measuring stick is net worth growth (which is a holistic or comprehensive measuring stick)\u2026.not necessarily portfolio and market growth.\u00a0 To develop wealth it\u2019s important to grow net worth, and to grow net worth it\u2019s important to control the things you can control. \u00a0Sure, having the appropriate balance in your portfolio is essential, but attempting to juice returns by implementing market timing strategies is dangerous and over the long term doesn’t work.<\/p>\n

Control the things you can control. Control spending, savings, and how much you pay in taxes. Couple that with a properly allocated portfolio invested for the long run and you are positioning yourself for success.<\/p>\n

We shouldn’t let fear and greed drive our investment decisions. If we back up to early 2013, we can say we heard the same song being played back then.\u00a0 And, if we allowed fear to drive our decisions, we would have missed out of some nice gains.<\/p>\n

I have no idea which direction the market will turn\u2026.up or down?\u00a0 But, I\u2019m hearing the same tune being played\u2026..simply another verse. Sing along but stick to your plans!<\/p>\n

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