Frothy, Bubbly Stocks

Posted by Drew Creekmur, MSPFP on 5:01 PM on September 8, 2020

cappucino

Frothy, Bubbly, Foamy. . . and we're not talking about cappuccino!

As much as we love a good #PSL, we are not discussing our favorite fall beverages today.

We're talking stocks. You may have noticed that the shortest bear market in history is over, and markets recently hit new record highs.

The question we have been hearing the most during our meetings in recent weeks has been - Is another bear market around the corner? Maybe. Maybe not.

As is pretty common in these situations, market strategists are split. Some see a new bull market that reflects a recovering economy.1 Others see troubling signs of a bubble that could burst.2

What could push stocks higher?

  • A market-ready COVID-19 vaccine or major treatment breakthrough that reignites optimism.
  • More government stimulus that supports consumers and businesses.
  • Good economic numbers that suggest we’re on the other side of the recession and the recovery continues.

What warning signs are flashing?

  • A rally mostly powered by tech mega stocks that isn't reflected in the broader market.
  • Uncertainty around a November election that's already contentious.
  • A possible “Minsky moment” market collapse fueled by the Fed’s easy money policy and unsustainable stock prices.3
  • Predictions of a second wave of infection that could provoke more shutdowns.

Bottom line, we can’t predict what comes next, and it’s too soon to claim victory for markets. Maybe we’re on a new bull market run. Maybe we’re facing a second correction.

Since we can't predict the future, we're focused on helping our clients cover their financial bases into 2021 and making sure that everyone is prepared to take advantage of the opportunities that volatile markets can offer.

Top 3 ways you can prepare for the future in the midst of this “frothy” market”.

  1. Consider Taking Profits In Your Investments
    The quick market recovery has given our clients the opportunity for large gains in their account. However, these gains are only on paper! In this type of market it never hurts to take some of those profits.
  2. Review Your Risk Tolerance
    The market sell off this spring gave most people the nauseating feeling of watching their investment account balances decrease rapidly. Market drops happen on a regular basis. However, in markets that are very volatile these type of quick drops occur with more regularity.
    If you noticed yourself being overly uneasy or edgy during the market sell off this spring it may be because you have too much risk in your investment accounts. Take a second to assess if your investments are appropriately aligned for your personal comfort and future financial goals.
  3. Consider Getting Cash Ready to Work
    Volatile markets give investors who have a clearly defined investment plan and the ability to control their emotions a massive opportunity. However, in order to realize this opportunity you have to have funds at the ready.
    Take some time to review your current cash reserves – if you can make an IRA, Roth IRA, or investment account contribution consider doing so now. Having these funds available in cash inside of an investment account gives our team the ability to execute on your plan and help you to more efficiently achieve your goals!

In the coming weeks we will continue to provide updates on the current economic and stock market environment. Additionally, keep an eye out for our 2020 Election Playbook Webinar that will be released in the next few weeks.

As always do not hesitate to shoot our team an email or give us a call if you want to discuss your financial plan or the action items above. We are here to assist in anyway that we can!

Schedule A Meeting To Talk

Creekmur Wealth Advisors may be reached at 866-358-4441 or Info@Creekmurwealth.com 

1https://www.cnbc.com/2020/09/08/goldman-sachs-10-reasons-the-bull-market-has-further-to-run.html

2https://www.cnbc.com/2020/09/07/stock-markets-cio-says-tech-bubble-not-expected-to-pop-anytime-soon.html

3https://www.cnbc.com/2020/09/03/markets-are-facing-a-potential-minsky-moment-collapse-strategist-says.html

 

Topics: Financial Planning, Investments, market volatility, Planning, Stock Market

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