Topic: Portfolio Management

U.S. stocks fell hard on Friday, extending a run of three consecutive down weeks in the market. The selling continued to begin the week as investors reacted to disappointing earnings results from Netflix and other companies, the Federal Reserve’s increasingly aggressive talk about interest rate increases, the war in Ukraine and further lockdowns in China. With its drop on Friday, the S&P 500 is down more than 10% on the year and back in correction mode. Market volatility, as measured by the VIX index, has increased as the Fed’s plans to tackle inflation have evolved. We are likely to see continued spikes in the VIX index, given the uncertainty in the current economic environment.

Last week, Fed Chairman Jerome Powell suggested that the central bank may be envisioning a quicker series of interest rate hikes than previously expected. Markets are bracing for a half-point increase in May, with more tightening ahead. The chart below provides a historical perspective of 10-year Treasury yields since 1980; we are a long way from the interest rates many remember from the early ’80s. David Hoag, the portfolio manager of Bond Fund of America said this week, “Central banks will do what they need to do to get inflation under control, but I don’t think that they will be able to go too far before the real economy starts hurting.” What he is implying is that the Fed is not likely to raise the federal funds target rate anywhere near the long-term historical average of 5% (today, we are in a range between .25% and .50%).

Free fall: Interest rates have plummeted in the era of easy money

Central Banks around the world are likely to join the U.S. Federal Reserve Bank in trying to get inflation under control. The strong global economy, war in Ukraine and supply chain disruptions continue to put upward pressure on prices. Most investors follow the stock market more than the bond market. As we recently wrote, the bond market has had a rough start to the year. The chart below shows that the bond aggregate index is down more than 10% through Friday. Rate-hike expectations have pushed bond yields higher, with 2-year Treasury yields up almost 2% on the year and 10-year Treasury yields up by almost 1.5%. We believe the bond market is pricing in most of the expected tightening. The good news: Higher yields create potential opportunities for fixed-income investors, who can earn better yields and returns than we have seen in the last three years.

Over long periods of time, markets have tended to adjust to rising rates. During the last 10 periods of rising interest rates, the S&P 500 has posted an average return of 7.7%. Bonds have also held up well during the same time, with an average return of 3.9% during seven rate-hiking cycles dating back to 1983. Of course, the usual caveat remains: Past results are not predictive of future returns, as each market cycle is different.

Despite the uncertainties, plenty of reasons for optimism remain, and these are several to watch:

• NATO is unified against Russia, and the Macron victory in France is a big statement for unification.
• Russia is bogging down in Ukraine and struggling to win the war.
• Individual tax revenues are up by almost 35% this year compared to 2021. 
• The deficit appears to be shrinking at a fast pace and could end the year at $1 trillion, compared to $2.77 trillion in 2021.
• The Supply Management Purchasing Managers Index, a reliable predictor of growth across the economy, has retreated from its post-COVID peak but remains at levels that signal growth ahead.
• The labor market remains tight and is beginning to draw older Americans who quit or retired during the pandemic back into the workforce.
• Profit margins for S&P 500 companies stood at record levels at the end of 2021.

So, what can we learn from all this? Market volatility can be unsettling, but for long-term investors, it is not unusual. The recent market drop is likely to be a mere blip in the long-term investment plan. We are not going to try to time the market; what really matters is time in the market, not out of the market. That means it is important to stay the course and continue to invest, even when the markets dip. We continue to adhere to the tried-and-true disciplines of diversification, periodic rebalancing and looking forward, while not making investment decisions based on where we have been.

It is important to focus on the long-term goal, not on one specific data point or indicator. In markets and moments like these, it is essential to stick to the financial plan. Remember first and foremost that panic is not an investing strategy. Neither are “get in” or “get out” — those are just gambling on moments in time. Investing is about following a disciplined process over time.

At the end of the day, investors will be well-served to remove emotion from their investment decisions and remember that over a longer time horizons, markets tend to rise. Market corrections are normal, as nothing goes up in a straight line. Making market decisions based on what might happen may be detrimental to long-term performance. The key is to stay invested and stick with the financial plan. Markets go up and down over time, and downturns present opportunities to purchase stocks at a lower value.

It all starts with a solid financial plan for the long run that understands the level of risk that is acceptable for each client. Regarding investments, we believe in diversification and in having different asset classes that allow you to stay invested. The best option is to stick with a broadly diversified portfolio that can help you to achieve your own specific financial goals — regardless of market volatility. Long-term fundamentals are what matter.

Sources:  Bloomberg, Capital Group, Schwab

This material contains an assessment of the market and economic environment at a specific point in time and is not intended to be a forecast of future events, or a guarantee of future results. Forward-looking statements are subject to certain risks and uncertainties. Actual results, performance, or achievements may differ materially from those expressed or implied. Information is based on data gathered from what we believe are reliable sources.

Using diversification as part of your investment strategy neither assures nor guarantees better performance and cannot protect against loss of principal due to changing market conditions.

Past performance is not a guarantee of future results.

The opinions expressed in this commentary are those of the author and may not necessarily reflect those held by Kestra Investment Services, LLC or Kestra Advisory Services, LLC. This is for general information only and is not intended to provide specific investment advice or recommendations for any individual. It is suggested that you consult your financial professional, attorney, or tax advisor with regard to your individual situation.

Securities offered through Kestra Investment Services, LLC (Kestra IS), member FINRA/SIPC. Investment Advisory Services offered through Kestra Advisory Services, LLC (Kestra AS) an affiliate of Kestra IS. CD Wealth Management and Bluespring Wealth Partners LLC* are affiliates of Kestra IS and Kestra AS.  Investor Disclosures: https://bit.ly/KF-Disclosures

*Bluespring Wealth Partners, LLC acquires and supports high quality investment adviser and wealth management companies throughout the United States.

Bonds are selling off around the world, and the Global Bond Aggregate index is down more than 10% since its peak in January, its worst drawdown on record. The bond market is flashing a warning sign that has correctly predicted almost every recession over the past 60 years: an inversion of the U.S. Treasury yield curve. 

The existence of an inverted yield curve is a signal that investors are more nervous about the immediate future than the longer-term outlook. An inversion if the yield curve has preceded every recession since 1955, but in and of itself, the inversion does not guarantee a recession will occur.

The most closely watched part of the curve is the 2-year Treasury compared to the 10-year Treasury. On Tuesday, the 2- and 10-year yield curve inverted for the first time since 2019 after starting the year at a spread of 79 basis points between the two. The 5-year Treasury bond and the 30-year Treasury bond inverted on Monday for the first time since 2006.

What is the yield curve?

A yield curve is a line that plots interest rates (yields) of bonds with equal credit quality but different maturity dates. There are three main shapes of a yield curve: normal (upward sloping), inverted (downward sloping) and flat. A normal yield curve, or upward sloping, is indicative of economic expansion, while an inverted yield curve points to an economic recession. 

With a normal yield curve, longer-maturity bonds have a higher yield compared to shorter-term bonds. For example, in a normal yield curve, a 2-year bond could yield 1%, a 5-year bond could yield 2% and a 10-year bond could yield 2.5%. The farther out one goes on the curve, the higher the yield. Conversely, an inverted yield curve slopes down, meaning that short-term interest rates are higher than longer-term interest rates. When the return of a 10-year bond is lower than that of a 2-year bond, for example, signs point to investors carrying a pessimistic outlook and a reluctance to commit money to longer-term maturities. 

Why does an inversion in the yield curve matter?

The yield curve is one of a handful of leading economic indicators that are considered reliable gauges of turning points in business cycles. Yield curve inversions are often viewed as a cause of a recession, but really, they are symptomatic of the conditions that lead to an economic recession.

An inversion in the yield curve generally indicates a recession is coming, most often within six months to two years. It does not mean that stocks are about to sell off; historically, the stock market has not peaked until months after the inversion, as seen in the chart below.

The National Bureau of Economic Research (NBER) defines a recession as “a significant decline in economic activity that is spread across the economy and that lasts more than a few months.” The chart below lists the components of Leading Economic Index as well as Coincident Economic Index (CEI). NBER primarily monitors the CEI for recession indicators, but these provide a retroactive assessment and don’t tell us much about where we are headed. The unemployment rate is another lagging indicator; unemployment rates always have been near historic lows heading into recessions. 

The chart also looks at the current level of 10 different leading economic indicators as well as the trends for each indicator. Consumer confidence has been waning as inflation runs high and the war in Ukraine continues into its second month. The S&P 500 trend is moving towards stabilization after the recent March lows, and the other leading economic indicators remain stable for now.

As the Fed continues to raise rates and investors anticipate tighter financial conditions, we will continue to watch the yield curve and other recessionary signals to determine how they may impact the stock market and your portfolios. While the Fed has finally announced it will raise rates to combat inflation, rates remain low by historical standards. The key message from the Fed is that it is focused on fighting inflation and is prepared to hike short-term interest rates steadily while reducing the balance sheet to attain its goals.  

So, what can we learn from all this? This week, we saw the yield curve invert for the first time since 2019, but remember: A recession is not a foregone conclusion. Every recession has been preceded by a yield-curve inversion, but not every inversion of the yield curve has led to a recession. Furthermore, even if a recession occurs in the next six months to two years, the stock market may continue to experience positive returns.

From a portfolio perspective, we continue to adhere to the tried-and-true disciplines of diversification, periodic rebalancing and looking forward, while not making investment decisions based on where we have been. As we say each week, it is important to stay the course and focus on the long-term goal, not on one specific data point or indicator. In markets and moments like these, it is essential to stick to the financial plan. Panic is not an investing strategy. Neither are “get in” or “get out” — those are just gambling on moments in time. Investing is about following a disciplined process over time.

At the end of the day, investors will be well-served to remove emotion from their investment decisions; over a longer time horizon, markets tend to rise. Market corrections are normal, as nothing goes up in a straight line. Making market decisions based on what might happen may be detrimental to long-term performance. The key is to stay invested and stick with the financial plan. Markets go up and down over time, and downturns present opportunities to purchase stocks at a lower value.

It all starts with a solid financial plan for the long run that understands the level of risk that is acceptable for each client. Regarding investments, we believe in diversification and having different asset classes that allow you to stay invested. The best option is to stick with a broadly diversified portfolio that can help you to achieve your own specific financial goals — regardless of market volatility. Long-term fundamentals are what matter.

Sources: CNBC, CNN, Schwab, Investopedia, iCapital

This material contains an assessment of the market and economic environment at a specific point in time and is not intended to be a forecast of future events, or a guarantee of future results. Forward-looking statements are subject to certain risks and uncertainties. Actual results, performance, or achievements may differ materially from those expressed or implied. Information is based on data gathered from what we believe are reliable sources.

Using diversification as part of your investment strategy neither assures nor guarantees better performance and cannot protect against loss of principal due to changing market conditions.

Past performance is not a guarantee of future results.

The opinions expressed in this commentary are those of the author and may not necessarily reflect those held by Kestra Investment Services, LLC or Kestra Advisory Services, LLC. This is for general information only and is not intended to provide specific investment advice or recommendations for any individual. It is suggested that you consult your financial professional, attorney, or tax advisor with regard to your individual situation.

Securities offered through Kestra Investment Services, LLC (Kestra IS), member FINRA/SIPC. Investment Advisory Services offered through Kestra Advisory Services, LLC (Kestra AS) an affiliate of Kestra IS. CD Wealth Management and Bluespring Wealth Partners LLC* are affiliates of Kestra IS and Kestra AS.  Investor Disclosures: https://bit.ly/KF-Disclosures

*Bluespring Wealth Partners, LLC acquires and supports high quality investment adviser and wealth management companies throughout the United States.

The S&P 500 saw its biggest weekly gain since 2020 last week. The Federal Reserve announced the first interest rate hike since 2018, a 25-basis point increase in its target range for the federal funds rate, to a range of .25% to .50%. The fed-funds rate is an overnight rate on lending between banks that influences other consumer and business borrowing costs through the economy, including rates on mortgages, credit cards, savings accounts, car loans and corporate debt. Raising rates typically restrains spending, while cutting rates encourages borrowing.

Fed Chair Jerome Powell had signaled that a rate hike was coming, and the market was focused on the Fed’s guidance on the outlook for the economy, inflation and the future path of policy rates. In an effort to slow inflation, the Fed has penciled in six more increases by year end, the most aggressive pace in more than 15 years. The committee also sees three more rate hikes in 2023, with short-term rates ultimately between 2.5% and 3%. 

The Fed’s economic projections are painting a scenario of a soft landing for the economy: inflation retreating while unemployment stays low and economic growth slows to a more long-term sustainable growth rate of 2% to 2.5%. The Fed is normalizing its policy as the economy no longer needs the pandemic-induced stimulus, and it also signaled that it would start reducing its balance sheet, marking the start of quantitative tightening.

Fed officials face three important questions as they consider their next moves:
• How quickly will it need to raise rates to a “neutral” level?
• Has the “neutral” level increased as rising inflation sends down borrowing costs?
• When will the Fed need to raise rates above neutral to deliberately slow growth?

Powell signaled greater concern that higher inflation might persist due to a hot job market with record job openings and wages increasing at their fastest pace in years. The central bank ended a long-running asset purchase stimulus program last week. Fed officials are facing the prospect of even higher inflation due to escalating sanctions by the West against Russia risking higher energy and commodity prices, combined with the new pandemic lockdowns in China further harming global supply chains.

Here are some of the effects we anticipate as the Fed embarks on raising rates:

Mortgages: While the federal funds rate doesn’t directly impact mortgage rates, they often move in the same manner. Despite mortgage rates moving higher, the current environment is still attractive if you’re looking to get a new mortgage or refinance your existing one.

Home Equity Line of Credit (HELOC): Typically linked to prime rate, the costs of a HELOC will move higher as the Fed raises rates. Those with HELOCs should expect to see their payments continue to rise in the near term.

Savings accounts and CDs: Rising interest rates mean that banks will offer higher returns on their savings and money market rates. It may take time for banks to raise rates to the level of current fed funds rates; banks normally act quicker in cutting rates.

Equity markets: The stock market has been a big beneficiary of the Fed’s willingness to keep rates low. In the last few months, the market has been pricing in higher interest rates. The S&P 500 has historically delivered positive returns over the past six Fed hiking cycles, averaging a 9.5% annualized return, as seen in the chart below.

S&P 500 Annualized Total Return During Previous Fed Hiking Cycles (%)

So, what can we learn from all this? While the Fed has finally announced that it will raise rates to combat inflation, rates remain low by historical standards. The key message from the Fed is that it is focused on fighting inflation and is prepared to hike short-term interest rates steadily while reducing the balance sheet to attain its goals.  

From a portfolio perspective, we continue to adhere to the tried-and-true disciplines of diversification, periodic rebalancing and looking forward, while not making investment decisions based on where we have been. As we say each week, it is important to stay the course and focus on the long-term goal, not on one specific data point or indicator. In markets and moments like these, it is essential to stick to the financial plan. Remember, first and foremost, that panic is not an investing strategy. Neither are “get in” or “get out” — those are just gambling on moments in time. Investing is about following a disciplined process over time.

At the end of the day, investors will be well-served to remove emotion from their investment decisions, and remember that over a longer time horizon, markets tend to rise. Market corrections are normal, as nothing goes up in a straight line. Making market decisions based on what might happen may be detrimental to long-term performance. The key is to stay invested and stick with the financial plan. Markets go up and down over time, and downturns present opportunities to purchase stocks at a lower value.

It all starts with a solid financial plan for the long run that understands the level of risk that is acceptable for each client. Regarding investments, we believe in diversification and having different asset classes that allow you to stay invested. The best option is to stick with a broadly diversified portfolio that can help you to achieve your own specific financial goals — regardless of market volatility. Long-term fundamentals are what matter.

Sources: CNBC, Goldman Sachs

This material contains an assessment of the market and economic environment at a specific point in time and is not intended to be a forecast of future events, or a guarantee of future results. Forward-looking statements are subject to certain risks and uncertainties. Actual results, performance, or achievements may differ materially from those expressed or implied. Information is based on data gathered from what we believe are reliable sources.

Using diversification as part of your investment strategy neither assures nor guarantees better performance and cannot protect against loss of principal due to changing market conditions.

Past performance is not a guarantee of future results.

The opinions expressed in this commentary are those of the author and may not necessarily reflect those held by Kestra Investment Services, LLC or Kestra Advisory Services, LLC. This is for general information only and is not intended to provide specific investment advice or recommendations for any individual. It is suggested that you consult your financial professional, attorney, or tax advisor with regard to your individual situation.

Securities offered through Kestra Investment Services, LLC (Kestra IS), member FINRA/SIPC. Investment Advisory Services offered through Kestra Advisory Services, LLC (Kestra AS) an affiliate of Kestra IS. CD Wealth Management and Bluespring Wealth Partners LLC* are affiliates of Kestra IS and Kestra AS.  Investor Disclosures: https://bit.ly/KF-Disclosures

*Bluespring Wealth Partners, LLC acquires and supports high quality investment adviser and wealth management companies throughout the United States.

Though the immediate economic impact of Russia invading Ukraine has been in the energy markets, sanctions placed on Russian banking and payment systems are causing increased volatility in global currency markets as well. As the war enters its third week, the Russian stock market was down more than 63% year-to-date before being closed this week, and the ruble hit a record low against the dollar. Global markets are suggesting that Russian debt is at a very high level of default.

You may recall that Russia previously defaulted on its debt in 1998, when it was reeling from the Asian Financial Crisis of 1997 and oil prices trading in the low $20s per barrel. This sent shockwaves through the global markets, culminating with the collapse and liquidation of the hedge fund Long-Term Capital Market. The International Monetary Fund (IMF) stepped in with a rescue package at a time when no government or company was sanctioning the Russian economy. It is difficult to imagine the IMF or other governments (outside of China) stepping in to rescue Russia if it were to default today.

What does the war mean for U.S. investors?

Russia’s invasion of Ukraine adds to the uncertainty that has weighed on stocks since the start of the year. History tells us stocks tend to be more volatile during periods of uncertainty, and while volatility is elevated at the moment, the VIX index remains well below levels seen during the height of the global pandemic or global financial crisis.

____________________

VIX Index, a measure of volatility in the equity market

Russia is the world’s second-largest producer of natural gas and third-largest producer of oil, accounting for 11% of global oil supply in 2021. The risk of a significant cut to the global oil supply has sent oil prices sharply higher. Russia and Ukraine also account for more than a quarter of the world’s wheat exports; we recently have seen higher food and commodity prices as well. 

Higher energy and food prices complicate the Federal Reserve’s efforts to handle inflation and rising rates. Higher oil and commodity prices may dampen consumer spending on discretionary items, and therefore, may help to cool economic activity — which takes pressure off the central bank to raise rates quickly. 

As the chart below shows, stocks have largely shrugged off past geopolitical conflicts. As we often say, the most important factors in stock performance are market fundamentals and the fundamentals of underlying companies. 

“Over the last few years, markets have been conditioned not to overact to political and geopolitical shocks,” said Mohamed Aly El-Erian, chief economic advisor at Allianz. For a longer-term perspective, notice the chart below that outlines global conflict and crises going back to World War II. If the red dots and lines outlining the geopolitical events were not visible, one analyzing the chart would not make a rational conclusion to sell based on a war. The chart shows a clear trend of positive returns over the long term.

We know that in the context of geopolitical risks, equity markets always have been resilient. The ups and downs triggered by the Russian invasion suggest that we will continue to have increased volatility, but no one knows for sure how long that volatility may last. We expect that the markets will work this out and reach new heights over time. We also expect that along the way, markets will experience sharp declines — much like we are seeing today.  

So, what can we learn from all this? Regardless of how the Russia-Ukraine war unfolds, the stock market is driven primarily by U.S. business activity. Although inflation in prices for oil, food and commodities is cause for concern, it remains important to make investment decisions based on logic, not emotions.

From a portfolio perspective, we continue to adhere to the tried-and-true disciplines of diversification, periodic rebalancing and looking forward, while not making investment decisions based on where we have been. As we say each week, it is important to stay the course and focus on the long-term goal, not on one specific data point or indicator.

In markets and moments like these, it is essential to stick to the financial plan.

Panic is not an investing strategy. Neither are “get in” or “get out” — those sentiments are just gambling on moments. Investing is a disciplined process, done over time. At the end of the day, investors will be well served to remove emotion from their investment decisions and to remember that over the long term, markets tend to rise. Market corrections are normal, as nothing goes up in a straight line. 

The key is to stay invested and stick with the financial plan. Markets go up and down over time, and downturns present opportunities to purchase stocks at a lower value.

It all starts with a solid financial plan for the long run that understands the level of risk that is acceptable for each client. Regarding investments, we believe in diversification and having different asset classes that allow you to stay invested. The best option is to stick with a broadly diversified portfolio that can help you to achieve your own specific financial goals — regardless of market volatility. Long-term fundamentals are what matter.

Sources: FactSet, Forbes, LPL Financial, Kestra Financial, Ritholtz, Schwab

This material contains an assessment of the market and economic environment at a specific point in time and is not intended to be a forecast of future events, or a guarantee of future results. Forward-looking statements are subject to certain risks and uncertainties. Actual results, performance, or achievements may differ materially from those expressed or implied. Information is based on data gathered from what we believe are reliable sources.

Using diversification as part of your investment strategy neither assures nor guarantees better performance and cannot protect against loss of principal due to changing market conditions.

Past performance is not a guarantee of future results.

The opinions expressed in this commentary are those of the author and may not necessarily reflect those held by Kestra Investment Services, LLC or Kestra Advisory Services, LLC. This is for general information only and is not intended to provide specific investment advice or recommendations for any individual. It is suggested that you consult your financial professional, attorney, or tax advisor with regard to your individual situation.

Securities offered through Kestra Investment Services, LLC (Kestra IS), member FINRA/SIPC. Investment Advisory Services offered through Kestra Advisory Services, LLC (Kestra AS) an affiliate of Kestra IS. CD Wealth Management and Bluespring Wealth Partners LLC* are affiliates of Kestra IS and Kestra AS.  Investor Disclosures: https://bit.ly/KF-Disclosures

*Bluespring Wealth Partners, LLC acquires and supports high quality investment adviser and wealth management companies throughout the United States.

In recent weeks, the markets have reacted to a myriad of economic data and geopolitical events. On the economic front, recent reports show weaker consumer spending with inflation levels last seen in 1982. On the other hand, the reports show strong job numbers with low unemployment rates. The Fed’s firm stance on controlling inflation has contributed to market volatility, and the picture is further clouded by uncertainty about the Fed’s plans to raise rates this year. 

Over the last week, the markets also have reacted strongly to the buildup of forces along the Ukraine border. As seen in the chart below, previous incidents involving Russia have had little impact on the global financial markets. We do not believe that diversified investors need to take stock market actions related to the potential invasion of Ukraine by Russia.

Historical geopolitical events involving Russia

Loss Aversion Theory demonstrates that the pain people feel when losing money is greater than the joy they feel from making money. The market’s decline to start the year tests this theory for many investors. The instinct to flee stocks when the market starts to fall can have a major negative impact on the long-term health of the portfolio. Stock market declines are an inevitable part of investing, but over long periods of time, stocks have tended to move higher. The S&P 500 has typically dropped at least 10% about once per year — and 20% or more about every six years — according to data from 1952 to 2021. Each historical downturn has been followed by a recovery and a new market high.

Investors who sit on the sidelines risk losing out on periods of market appreciation that follow the downturns. From 1929 through 2020, every decline of 15% or more in the S&P 500 has been followed by a strong recovery. The chart below shows how just missing a few of the market’s best days can hurt long-term investment return. The takeaway for investors is to remain invested during volatile times so that when the market starts to recover, one does not miss out on the returns to recover the unrealized losses.

Missing just a few of the market’s best days can hurt investment returns

As we write each week, we believe in sticking with the plan to avoid making decisions based on emotions — particularly when the market goes lower. We regularly practice dollar-cost averaging, investing an amount of money into the portfolio at regular intervals, regardless of whether the market moves up or down. Most people do this every two weeks with their 401(k) plans without even realizing that they are dollar-cost averaging. People who follow this strategy purchase additional shares at lower prices and fewer shares at higher prices. Over time, though, investors pay less per share.

As seen in the chart below, the dark blue line represents stock price, and the lighter blue is number of shares owned. As the price drops in months 7 through 10, the number of shares purchased each month increases. This does not necessarily ensure a profit or protect against losses, but it keeps investors in the market and helps to take advantage of market downturns. 

When stock prices fall, you can get more shares for the same amount of money and lower your average cost per share

Behavioral economics tells us recent events carry a larger influence on our perceptions and decisions. It is always important to maintain a long-term perspective, as markets tend to reward those who invest over longer periods of time. Those who can ignore the short-term worries and the noise — and focus instead on long-term goals — are better positioned to be rewarded for the future.

So, what can we learn from all this? Investors will be well-served to remove emotion from their investment decisions and remember that over the long-term, markets tend to rise. Market corrections are normal; nothing goes up in a straight line. Making market decisions based on what might happen may be detrimental to long-term performance. The key is to stay invested and stick with the financial plan. Markets go up and down over time, and downturns present opportunities to purchase stocks at a lower value.

It’s important to remember that panic is not an investing strategy. Neither are “get in” or “get out” — those sentiments are just gambling on moments. Investing is a disciplined process, done over time.

From a portfolio perspective, we continue to adhere to the tried-and-true disciplines of diversification, periodic rebalancing and looking forward, while not making investment decisions based on where we have been. Making market decisions based on what might happen may be detrimental to long-term performance. The key is to stay invested and stick with the financial plan. As we say each week, it is important to stay the course and focus on the long-term goal, not on one specific data point or indicator.

It all starts with a solid financial plan for the long run that understands the level of risk that is acceptable for each client. Regarding investments, we believe in diversification and having different asset classes that allow you to stay invested. The best option is to stick with a broadly diversified portfolio that can help you to achieve your own specific financial goals — regardless of market volatility. Long-term fundamentals are what matter.

Sources: American Funds, JP Morgan, Schwab

This material contains an assessment of the market and economic environment at a specific point in time and is not intended to be a forecast of future events, or a guarantee of future results. Forward-looking statements are subject to certain risks and uncertainties. Actual results, performance, or achievements may differ materially from those expressed or implied. Information is based on data gathered from what we believe are reliable sources.

Using diversification as part of your investment strategy neither assures nor guarantees better performance and cannot protect against loss of principal due to changing market conditions.

Past performance is not a guarantee of future results.

The opinions expressed in this commentary are those of the author and may not necessarily reflect those held by Kestra Investment Services, LLC or Kestra Advisory Services, LLC. This is for general information only and is not intended to provide specific investment advice or recommendations for any individual. It is suggested that you consult your financial professional, attorney, or tax advisor with regard to your individual situation.

Securities offered through Kestra Investment Services, LLC (Kestra IS), member FINRA/SIPC. Investment Advisory Services offered through Kestra Advisory Services, LLC (Kestra AS) an affiliate of Kestra IS. Kestra IS and Kestra AS are not affiliated with CD Wealth Management. Investor Disclosures: https://bit.ly/KF-Disclosures