Now that my wife is almost nine months pregnant (due May 23rd) with our third daughter, we’ve been reminiscing about the last time we were at the hospital for the birth of our second daughter, Alexis. Some of you may remember that day, too, because you were likely watching one of the cable news stations as stocks fell throughout the day and the Dow lost over 2% —it was August 2, 2011.
My investment data spreadsheet was very close to showing bright red “SELL” indicators in several of my client’s investments when I downloaded the data the evening of August 1st, and if you’ve ever slept in one of the “Dad” hospital beds (correction- the reclining chair with a metal bar right where there should be a cushion), you know that between the market and lack of comfort, I was not sleeping very well. Luckily, my wife wasn’t really sleeping well either, and was fine with me having the television on. I’m always watching the markets, of course, but of particular importance the morning of August 2nd was the performance of the futures and overseas markets. We watched the stock ticker in anticipation of the market correction that I knew could possibly take hold any moment now.
Fast forward to 8:30 am- the markets opened as the nurses and doctors started streaming into our room believing that my daughter’s birth would happen within the hour. I had my laptop out and was working feverishly to sell before prices dropped further for the day since my “sell” indicator was triggered. The nurses were all preparing the room, pulling down the lights, throwing open the cabinets, and asking me to move so they could do what they needed to do. Like selling stocks in a war zone… In the meantime, my wife (she’d had an epidural, so I know this is a-typical birthing behavior), was saying, “Oh, I’m fine. He just needs a couple more minutes to do this.” The nurses weren’t pleased, but we were standing our ground—she and the baby were doing fine, so our client’s accounts came first.
Once the trades were placed and Alexis was born, it was time to sit back and see what would happen next. Here’s how the following days played-out: On August 4th the Dow lost 510 points (-4.3%); it lost another 624 points (-5.5%) on August 8th; and for good measure another 508 points (-4.5%) on August 10th, which just happens to be my dad’s birthday. Not exactly a good week of family birthdays for me in 2011!
As our clients know, my strategy is to identify downward trends that historically occur before large market corrections in order to avoid the steep losses that many ‘buy and hold’ advisors and investors suffer through. Then, when indicators are strong again, we buy back in at a lower price than what we sold at, and ride the market back up again. This management of risk is why many of you choose to have me manage your funds.
So… When will the next market correction occur? Well, that remains to be seen- it could be on May 23rd just as my wife is getting ready to give birth again- stranger things have happened, after all. My current thought is that stocks are riding bizarrely high, and multiple analysts are suggesting that the unusual gains in the market this year will not hold through the summer. Rest assured that with a new baby coming, I won’t be taking any vacations this summer; and even when we’re at the hospital, your accounts are being watched closely.
Do you have an investment strategy that seeks to protect your portfolio against volatile economic conditions? Call me to schedule a free review of your current investment portfolio – 913.402.6099.
John P. Chladek, MBA, CFP® is the President of Chladek Wealth Management, LLC, a fee-only financial planning and investment management firm specializing in helping families and couples who are not yet retired realize their financial goals. For more information, visit http://www.chladekwealth.com.