Markets Over-Valued? Here’s your next move


January 11, 2017


Morgan_G_WW_Photo.jpgThe situation

After a post election bounce, domestic stocks are starting 2017 near all-time highs.

What we are hearing

Some clients have noticed this and contacted me. Like Icarus from Greek mythology, they think the market’s wings have flown too high, and will soon melt in the sunlight.

“What changes should we make to take advantage of the coming drop?” they ask.

“Absolutely none,” I reply. Let me explain.

What you should do

On second thought, there is one change I would suggest—a new metaphor. Icarus was trying to escape from prison—a desperate undertaking. You, on the other hand, are building wealth over a lifetime for family needs, retirement and a legacy—a long-term undertaking if ever there was one. It is more like going on a long journey than trying to escape from prison.

Think of the retirement plan we have put together as the vehicle you’ll be driving on your journey. It’s already been outfitted with a strong, flexible chassis and the right kind of shock absorbers. That’s because we know there will be bumps in the road. There’s no need to try to change your vehicle or route just because you think you see one of the bumps coming.

The trouble with trying to time the market’s ups and downs is that you not only need to predict the future volatility, you also need to get the timing right. That is extraordinarily difficult given that stocks can remain under or over-valued for extended periods of time.

That’s also why market timers don’t do as well, in the long run, as investors who stick to a sound plan. I remember reading an article in Forbes last year about the firm RBS. I have no doubt it is filled with very smart, experienced and well credentialed people. But on January 11, 2016, they decided that markets were overvalued and recommended that investors “sell everything.” The Dow Jones Industrial Average that day was 16,346. Three months later it had reached 18,098. By year-end it was pushing 20,000! I truly feel for the investors who followed that advice.

To return to the journey metaphor, just imagine how long it would take to reach your destination if you kept stopping to change your vehicle or your chassis or even your entire route, just because you anticipate a rough spot ahead. Maybe it will be rough, or maybe it won’t. Regardless, the quickest way to get where you want to go is to plan in advance. Anticipate what you may encounter, purchase the right vehicle and drive with confidence, keeping your eyes focused far down the road. By the way, that is also how to achieve a peace of mind that makes the trip—not just the destination—a happy one.

To learn more, please contact Jim Waters, CFP®, at 713.964.4028 or