We know that heading into the third quarter of the year we will experience more headlines surrounding the “hot topics” in market news, as the US election rhetoric heats up, war continues on in the Middle East and Eastern Europe, Inflation persists, Interest rates may or may not change, and let’s not forget the headline performance of the “Magnificent Seven” and AI.
These same headlines, leading us into the second half of the year, have also shaped market expectations during the first half of the year. Our Quarterly Market Review outlines market performance and a timeline of events for the past quarter. It begins with a global overview, then features the returns of stock and bond asset classes in the US and international markets.
Curio Wealth Quarterly Market Review
With all the news and the continuous barrage of information on our devices it can be difficult to remain focused on your own personal financial journey. In fact, even experienced investors tend to make 3 common mistakes when the uncertainty becomes too great:
Trying to Time the Market
Investors may be tempted to cash out of the stock market to avoid a predicted downturn. But accurately forecasting the market’s direction in order to time the “right” moment to buy or sell is a guessing game. Missing only a brief period of strong market performance can drastically affect your lifetime wealth.
Focusing on the Headlines
Investors may become enamored with popular stocks based on recent performance or media attention—and overconcentrate their portfolio holdings in these companies. One example is the rise of the large US technology companies known as the “Magnificent 7” (Alphabet, Amazon, Apple, Meta Platforms, Microsoft, NVIDIA, and Tesla). Investors should remember that it is very difficult for individual stocks to consistently outperform the market on a regular basis.
There will inevitably be times when these high-performing stocks turn negative. This is why having a well-diversified portfolio will pay off.
Speaking of headlines, investors often make decisions based on predictions of election results, believing that if their preferred candidate does not win the market will go down. Actually, history tells us that markets have gone up in the majority of elections years. Nevertheless, we often hear this prediction from both sides of the aisle, which tells us that there will be buyers and sellers, regardless of the outcome at the polls.
Chasing Past Performance
You might be inclined to select investments based on past returns, expecting top-ranked funds to continue delivering the best performance. But can they maintain that outperformance? Research shows that most funds ranked in the top 25% based on five-year returns didn’t remain in the top 25% in the next five years. In fact, only about one in five equity funds stayed in the top-performing group, and only about a third of fixed-income funds did. The lesson? A fund’s past performance offers limited insight into its future returns.
Whenever our resolve is tested, we take a different approach. Rather than look outward, searching for a signal amidst the noise of uncertainty, we look inward and focus on the things we can actually control, whether in good times or bad. In our experience, here are 3 things you should focus on when either fear or the fear of missing out is testing your resolve:
Make sure your investment strategy is right for you:
In good times and bad, investors should spend their energy revisiting their financial plan, making sure their investment portfolio remains consistent with their growth or income objectives and is tied to their goals and values. Your globally diversified portfolio is built for these times—for all times—tailored for your goals, time horizon, and risk tolerance. It’s built to liberate you from fear and FOMO alike.
Rebalance your portfolio
Rebalancing helps to take the emotions and speculation out of trading and provides a framework to make consistent decisions. If your target investment portfolio is 60% stocks and 40% bonds and the stock market goes up you would likely sell stocks and buy bonds to realign your portfolio. Essentially, this is selling high and buying low while keeping your portfolio aligned with your objectives.
Manage taxes
Managing taxes is a great way to take action and save money. Growing investments is one of the greatest ways to build your wealth, and paying taxes is one of the greatest detractors of wealth. Harvesting losses and gains, strategic withdrawals, Roth conversions, taking advantage of different account types, and investment alignment are ways to manage your tax bill, now and in the future.
At Curio Wealth we believe it is essential to integrate investments with financial planning and tax management to provide our clients with the best opportunity to reach their financial goals. Schedule a call with our team if you would like to discuss how your portfolio is aligned with your goals.
