The markets, as measured by the popular averages, are currently trading at, or near, record highs. Now what?
Perhaps the markets will continue to gradually move up, not every day, but on most days, leading to new highs.
Alternatively, we may see a modest correction, possibly on the order of 10%, followed by a resumption of an upward trend, leading to new highs.
A third possibility, would be a severe decline, suggesting a new bear market and declines on the order of 50%, along the lines of the major selloff following the 2007 highs. Historically, all major declines have been followed by a new bull market, eventually leading to new highs.
The common denominator in all of these potential scenarios is, “leading to new highs”.
What should investors do?
First, remember that, over the long term, common stocks have proven to be an attractive investment opportunity, if you can navigate through the ugly periods. To that end, investors should carefully review their long-term objectives and make sure that their portfolios, perhaps with help of their advisor(s), are structured to meet those objectives. If so, prepare to stay the course. If not, make the appropriate adjustments so that you are in a position to stay the course.
Markets fluctuate and can be very scary, but staying the course has generally proven to be the right strategy.
All comments and suggestions are welcome.
Walter J. Kirchberger, CFA