On recent market volatility

Mike Loewengart, Vice President of Investment Strategy

E*TRADE Capital Management

10/23/18

Given the recent volatility we’ve seen these past few days and weeks, we wanted to deliver our perspective to hopefully help you drown out the noise and remain focused on what matters most.   

Sharp market declines like we see today can certainly be unnerving and cause anxiety, but we encourage investors to look beyond near-term volatility and stay focused on achieving their primary financial objectives (which are usually years and sometimes decades away). You may remember we experienced a similar bout of volatility when the year kicked off, and yet equity markets eventually rebounded. Markets are making waves amid a confluence of risks including higher interest rates and concern that tariffs and ongoing global trade disputes could ultimately put pressure on corporate profits.

Importantly, let’s consider that this volatility is taking place against the backdrop of robust economic fundamentals in the US, and investors should remember that the long-term prospects for growth are bright. In addition, October has a long history of volatility. Near-term risks will always abound, but prudent long-term investors remain invested for the long run.

We continue to believe that a portfolio appropriately diversified across asset classes and aligned with an investor’s unique circumstances and goals remains a powerful way to accumulate wealth over the long term. It’s tempting to try to time the market during conditions like this, but this year should serve as an example that most attempts at timing will be fruitless. Small caps led the pack in Q1 and Q2 but reversed sharply in Q3. International developed markets did the opposite, reversing to the upside in Q3. Each investor knows best what is going to spur them to fight or flight but responding to those urges can often result in poor investment decisions over time. 

Reversals cannot be predicted with accuracy. Practical investors should remain in a disciplined long-term approach with a level of risk and corresponding asset mix they are comfortable with in order to benefit from the potential of compounding of investment returns over time. Diversify appropriately, look past the near-term noise, and stay the course.

Thanks for reading,

Mike Loewengart

Vice President, Investment Strategy

E*TRADE Capital Management, LLC

Mike Loewengart is the Vice President of Investment Strategy for E*TRADE Capital Management, LLC. Mike is responsible for the asset allocation and investment vehicle selections used in E*TRADE’s advisory platforms. Prior to joining E*TRADE in 2007, Mike was the Director of Investment Management for a large multinational asset management company, where he oversaw corporate pension plan assets. Early in his career, Mike was a research analyst focusing on investment manager due diligence for the consulting divisions of several high-profile investment firms. Mike holds series 7, 24, and 66 designations, as well as the Chartered Alternative Investment Analyst (CAIA) designation. He is a graduate of Middlebury College with a degree in economics.