Jan 4, 2019 4 min read

What is going on in the stock market? The headlines have not been appealing lately. The market is volatile. We lost 650 points on Christmas Eve and gained 1,000 on the day after Christmas. A number of days, there have been swings of 800 points – sometimes closing higher and sometimes losing value.

The Standard & Poor’s 500 was down 6.2 percent for the 2018, the biggest loss in a decade. The results would have been worse without large gains on the last trading day of the year.

Many professional traders were down a lot more. Warren Buffett, who is often considered to be one of the best investors in the country, also had a rough year. His company, Berkshire, lost $2.77 billion this past Wednesday on the Apple stock it owns.

This was just one day!

Some of his other major holdings for 2018 were Bank of America (down 17 percent) and JP Morgan (down 8 percent).

The U.S. economy is stronger than it has been, with the unemployment rate almost lower than it has been in almost 50 years. There are “Help Wanted” signs everywhere. We had a tax cut that stimulated the economy and there is less regulation than we have had for years.

The market really began to suffer in December, resulting from the ongoing trade war with China, rising interest rates and other factors. The Fed is going to raise interest rates when the economy is heating up and inflation increasing. The tight labor market is starting to produce better gains in wages than we have had in years. The stock market is fully priced, so when a company reports lower sales, its share prices are penalized. That is why Apple lost so much this week.

Heading into October, the market was up 8 percent. Fed chairman Jerome Powell said interest rates were “a long way” from what he considered to be neither stimulative nor restrictive. The market interpreted this as meaning interest rates could go up much higher than expected. Tariffs that have been placed on some imported goods are also a major concern for the market. Brexit is back in the news, and part of the government is currently shut down.

There is talk of a possible impeachment. The U.S. House brings the charge and the Senate is the jury. The Senate will never throw the president out of office, but it is just one distraction the country does not need.

What should you do about all of this uncertainty? That depends on when you need to access your market money. Someone who does not need the money for years should not be concerned. The market may go down lower now, but eventually it probably will be higher.

While there is never a good time to lose money in the market, there is a worst time. That is right before you retire or if you are in the early years of retirement. Money you have saved in an IRA or 401(k) can be very vulnerable. Once you start taking money out to live on in a down market, it can be very costly.

If you endure a big loss early, you could be wiped out by sequential risk. If you are farther along in retirement, losses are not as financially devastating.

Market downturns are not always short-lived. If you had invested money in the S&P 500 on Jan. 1, 2000, it took 12 years to recover your losses. This is without pulling money out of the market. Think how much worse it would be if this was your 401(k) and you were pulling out 4 percent each year to live on.

No one can time the market. Not you, me or even Warren Buffett. Make sure you are not taking excessive risk. Your market money must always be in the market and your non-market money can never be in the market.

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.