Apr 5, 2018 4 min read

The stock market has continued the wild ride that began in February. We had recovered from the downturn, but volatility increased again last week. On Wednesday, the Dow began down 500 points, but ended the day up 200. We have already experienced two 10 percent corrections this year.

Many people were lulled to sleep by a very calm 2017. Volatility is a normal occurrence in the stock market. How important this volatility is to you depends on your risk tolerance and how soon you will need to spend the money. Normally, younger people can afford to take more risk than older investors.

The markets like certainty and knowing what lies ahead. There is currently great fear that we will get into a trade war. The president recently imposed tariffs on some import, and it is only natural that foreign governments retaliate against some of our exports.

We exported $2.3 trillion to other nations in 2017. That translates into a lot of jobs and profits for the United States.

There are winners and losers in every war. Some industries will benefit if prices are higher on their foreign competitors’ products. Other Americans will lose their jobs if their companies cannot sell as many products in overseas markets. Consumers will have to pay more for many things that they buy.

This all would be inflationary. That means things we buy would cost more. That could lead to lower savings or larger credit debt. Neither is a good thing.

The yield curve has been flattening. Normally, long-maturity debt pays a higher interest rate than short-term borrowing. Investors demand this because they are tying up their money for a longer time and get left behind in a rising interest rate environment. A flattening curve means there is not the normal spread between short-term and long-term rates. This often indicates some brewing problems in the stock market.

Tech stocks have been one of the biggest winners the past few years. Facebook is facing a lot of scrutiny over its privacy policies, and that has affected its stock values. Amazon has been under attack by the president.

It is very unusual for a president to go after one company so often. These two companies have a combined market capitalization value of about $1.1 trillion. Many Americans own these stocks.

Many seniors are still taking too much risk in their portfolios. It is not unusual to see someone in their 60s or 70s who are 100 percent invested in the stock market. That is way too much risk at that age.

I recently talked to a stock market professional who was promoting a plan that would get you out of the market before a correction. A professional would point out things on a chart and say that was the sell or buy sign.

If only it was so easy. No one can time the market. Your market money must always be in the market and your non-market money should never be in the market. When J.P. Morgan was asked how he made so much money, he said, “I sold too soon.”

Inflation is going to increase over events going on in the country. The Fed is going to raise rates. If inflation picks up too much, it will raise rates more quickly. This will not be a positive for the stock markets in the short term.

Make sure your investments match your time horizon.

Gary Boatman is a Monessen-based certified financial planner and author of “Your Financial Compass: Safe passage through the turbulent waters of taxes, income planning and market volatility.”

To submit columns on financial planning or investing, email Rick Shrum at rshrum@observer-reporter.com.