Clouds May Be Gathering: Should Investors in Palm Coast Be Worried About a Storm?

Piggy Bank,3d Render

As we navigate the ever-changing financial landscape, staying informed and prepared for potential market fluctuations is crucial. At Capstone Planning in Palm Coast, we understand the importance of financial planning and are here to help you weather any storm. Some factors could trigger a market selloff in the weeks or months ahead.

Factor #1: Stocks Are Trading at Record Highs

Stocks have posted multiple record closes, and the S&P 500 has been trading well above its 200-day moving average. When stocks repeatedly push new highs, it’s not uncommon to see a pullback as traders take profits. While this isn’t a definitive sign of an impending selloff, it’s something to be aware of as part of your financial planning strategy.

Factor #2: Investors Are Watching the Fed Like Hawks

The expectation of lower interest rates primarily drives the 2024 rally. The Federal Reserve voted to keep rates steady at its most recent meeting, which wasn’t surprising given the latest data didn’t show enough improvement in inflation. At this point, the market is pricing, expecting a fall rate cut. However, if the Fed indicates a delay in rate cuts into 2025, markets may drop as investors revise their expectations. Given that the European Central Bank and Bank of Canada recently voted to cut interest rates, it doesn’t seem likely that the Fed will be far behind.

Factor #3: A “Trigger Event” Could Cause a Selloff

Sometimes, even when overall conditions look good, a single event can cause investor psychology to flip and markets to drop. These events are unpredictable, but they are a normal part of market cycles. Building flexibility into your investing approach is essential to navigate these unforeseen challenges.

Market Drops Are Normal

The chart below shows market drops in the S&P 500 since 2000. You can see that markets have fallen at least 10% in the vast majority of years. However, most of those years still ended in the green. The big takeaway? Market drops are regular and happen frequently.

Should You Sit on the Sidelines to Wait Out the Uncertainty?

An old investing adage may have made sense once: “Sell in May and go away.” The idea is that an investor should sit the summer out and buy back later in the year. Today, this kind of advice doesn’t match our complex world. Markets move quickly, and sitting on the sidelines often means missing out on the recovery. The overall case for the economy and stocks remains bullish.

Enjoy the Summer with Confidence

At Capstone Planning in Palm Coast, we encourage you to relax and enjoy the beginning of summer with your family and friends. We’re watching the markets closely and will reach out as needed to ensure your financial planning remains on track.

Warmly,

Your Capstone Planning Team

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Focusing on these factors and understanding that market drops are a normal part of investing can help you better prepare for any potential market changes. Remember, financial planning is about staying informed and adaptable. At Capstone Planning, we’re here to help you navigate these uncertainties and secure your financial future.