Will the Market Make Waves This Summer?

By Kate Warne June 14, 2017

Summer is here, with longer days, warmer weather and family trips. Before you vacation, set up an investment checkup so you’re prepared for the possibility of bigger market waves ahead.

The current bull market

More than eight years without a drop of 20% or more means this is now the second-longest bull market. The S&P 500 is up more than 200%, and stocks have been rising pretty steadily, but with many pullbacks, since March 2009. But you shouldn’t be concerned about the length of the bull market. Fortunately for investors, bull markets don’t usually die of old age. They’ve frequently ended when bubbles burst or recessions emerged – and Edward Jones doesn’t think either is happening today.

4 strategies to help you stay invested

Despite expectations that greater global uncertainty would trigger higher stock market volatility this year, stocks have been calmer than usual. But the Federal Reserve plans additional short-term interest rate increases, and politics remain in the headlines. Those could provoke more volatility. As you prepare for summer relaxation, make sure your investments don’t take a vacation. Edward Jones recommends four time-tested strategies to help you prepare for higher volatility and stay invested when stocks pull back.

  1. Stick to the right mix of stocks and bonds in your investment portfolio, based on your risk tolerance and long-term goals. Since stocks have been rising in value, they may now make up a greater percentage of your portfolio than you had intended, which could increase your risk. Talk to your financial advisor about whether you need to rebalance your portfolio to return to the mix that’s right for you.
  2. If you’re concerned about short-term volatility, consider dollar-cost averaging, which involves investing a certain amount of money every month, for example. By doing so, you can put market volatility to work for you, buying more shares when prices are lower and fewer shares when prices rise.
  3. Review how much you have in cash. You’ll want enough cash to cover any short-term expenses that might come up. A bit more cash than usual can help you avoid selling investments at lower prices and also give you the ability to buy more, if appropriate.
  4. Improve your portfolio’s diversification. Owning a wide variety of different asset classes in addition to U.S. large-cap stocks and bonds can help reduce your portfolio’s volatility over time, since they don’t all move together. And staying invested is easier when your portfolio’s value is more stable than the stock market.

Strategies like dollar-cost averaging and diversification cannot guarantee a profit or protect against losses, but may help you better weather the ups and downs of the market.

Navigating a correction

Staying invested is one of the most important strategies for long-term investors. Also, be prepared to “buy the dips.” Edward Jones believes the fundamentals – such as continued solid economic growth and improving earnings growth – remain positive, helping drive stocks higher over time. Those positive fundamentals are also reasons to use any pullbacks to add stocks* at lower prices. Remember that when stocks drop together, little attention is paid to quality, so corrections and other pullbacks can be opportunities to add quality investments.

Volatility is a normal part of investing. Make sure you’re prepared for market fluctuations this summer and beyond, giving you confidence in your long-term strategy.

Important information:

*Equity investing involves risks, the value of your shares will fluctuate, and you may lose principal.

This information is for educational and illustrative purposes only and should not be interpreted as specific investment advice. Investors should make investment decisions based on their unique investment objectives and financial situation.

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