Dealing with Equity Market Risks
Recently, equity investors have been pleased to see their equity investment values soar as the Dow Jones average has grown to over 20,000. The big question, “is this stock growth supported and can this growth last?”
Now, according to some well-known investors, the current equity market may be due for a harsh correction*. That’s the view of Mr. John Hussman, President of the mutual fund Hussman Investment Trust, and Stanford University economics PhD. In March of this year (2017), writing in Fortune.com, Hussman says you can expect the S&P 500 to return no more than 1% on average over the next decade. Sooner than that, he predicts, the stock market may plunge as much as 60%. Hussman calls the current environment “the most broadly overvalued moment in market history.” Stocks have now gone eight years without a bear market; a drop of 20% or more. That’s much longer than usual and a red flag for many warning that the market is due for a dip.
For your personal planning, retirement, and estate building purposes, investing or continuing to invest into the current equity market risks may not be right for you. As a reminder, in the last major market retreat of October 2007, the Dow Jones average retreated from 14,164 to 6,547, by March 2009, a 53.8% drop. Then, it took until March 2013 to get back to the October 2007 levels.
If a major market correction should occur in the near future, waiting years for market losses to be recaptured may not work with your plans. Also, if you are in retirement, and such losses were incurred, your tax-deferred plans will still have IRS required minimum distributions, which will reduce your account balances even more.
If you’d like to learn more about equity market risks, download the PDF information to the right. Fortunately, there are options to handle this continued equity market risk. If you are concerned about equity risk, give Business Planning Group a call and let’s discuss options for you to eliminate or at least reduce your current equity market investment risks.