Last week, my dear friends at Fox26 Houston, Melissa Wilson and Tom Zizka, shared a few minutes with me to discuss the plunge in the markets, the drop in oil prices and how big of a correction there could be.
Importantly, as I have been writing from some time now, is that the dynamics of the market have changed. Since the financial crisis lows, the financial markets have been elevated by repeated rounds of artificial liquidity from the Federal Reserve combined with artificially suppressed interest rates.
With the Federal Reserve now trying to lift interest rates, and with no more injections of liquidity currently, the markets have begun to struggle. Combine that lack of support with weak economic data, deteriorating economic data, and decline corporate profitability and you have the same ingredients that have preceded both previous bull market peaks.
Could this time be different? Sure. However, history suggests that it likely won’t be.
If I am correct, this is NOT the time to avoid paying attention to your money. Throughout history, the market has spent more time getting “back to even” than making new highs.
While the market has no expiration data, unfortunately you do. Therefore, you really can’t afford to spend the majority of saving and investing time frame repeatedly trying to get back to even.
There are indeed times that you want to be heavily invested in the financial markets. However, now is not likely one of them.
Pay attention to your money. If you don’t, why should any one else?