What You Need to Know About the Stock Market During A Presidential Election Year

Presidential election years bring a lot of uncertainty and stress. And that’s not just for the candidates who are running.

In fact, during the 2016 election cycle, one study found that at least 50% of Americans were more stressed out because of the election. And this was true across all party lines.1

So, why does that matter?

Because stressing about election uncertainty can affect your mindset and trigger emotional investing decisions.2

The good news is that you can avoid the frenzy around the upcoming election—and the stress and poor financial choices that may come with it—if you know the facts about the markets during presidential election years. Knowing these facts can help you keep a level head no matter what the outcome of the next election is.

7 Facts About Markets In A Presidential Election Year

Don’t Let the Election Frenzy Derail a Good Investment Strategy

It’s no secret that presidential election years are uncertain times—and that investors and the stock market like certainty.

It’s also no secret that the stock market is influenced by several factors—and that a presidential election may not even be the most significant one.3

Of course, it can be easy to get caught up in campaigns, politics, and elections. And they do matter. Just not as much as you may think when it comes to investing.

Unfortunately, too many people let ideas about who could win office—and what they’ll do when they get there—run wild. And that can mean more stress and anxiety that overshadow sound investment choices and strategies.

In the end, stressing about the “what ifs” of the election just isn’t productive. As portfolio managers, we have seen how elections can fuel investors’ stress and lead them astray when it comes to their financial choices and their long-term goals. We also know how helpful it can be to have a sounding board when emotions run high. That’s why we’re here.

So, while the excitement of the election can be great inspiration to vote, don’t let it drive your investment choices. And, remember, whatever happens on November 3, 2020, life will go on. Instead of stressing about the “what ifs,” give us a call. We are here to support you, and we can help you create a personal financial strategy for the election year and beyond.

1 – https://www.apa.org/news/press/releases/stress/2016/presidential-election.pdf
2 – https://www.npr.org/sections/thetwo-way/2016/10/15/498033747/survey-says-americans-are-getting-stressed-by-the-elections
3 – https://www.hartfordfunds.com/practice-management/client-conversations/10-things-you-should-know-about-politics-and-investing.html
4 – https://www.hartfordfunds.com/practice-management/client-conversations/10-things-you-should-know-about-politics-and-investing.html
5 – https://insight.factset.com/third-year-after-presidential-election-charm-for-sp-500
6 – https://www.usatoday.com/story/money/2019/11/05/election-2020-how-does-stock-market-perform-election-year/4165271002/
7 – https://www.kiplinger.com/article/investing/T043-C008-S003-how-presidential-elections-affect-the-stock-market.html
8 – https://www.capitalgroup.com/individual/planning/investing-fundamentals/presidential-election.html

PFG Private Wealth Management, LLC is a registered investment adviser.  Information presented is for educational purposes only and does not intend to make an offer or solicitation for the sale or purchase of any specific securities, investments, or investment strategies. This material and information are not intended to provide tax or legal advice.  Investments involve risk and, unless otherwise stated, are not guaranteed.  Be sure to first consult with a qualified financial adviser and/or tax professional before implementing any strategy discussed herein. Past performance is not indicative of future performance. Insurance products and services are offered and sold through individually licensed and appointed insurance agents. 

Is The Sky Really Falling?

“Record Economic Plunge”1
“Second-Quarter GDP Plunged by Worst-Ever 32.9%”2
“U.S. Economy Contracted at Record Rate Last Quarter”3
It sure sounds like the sky is falling.

Is it really? Let’s take a step back and put the news in perspective.

The coronavirus shutdown thumped the economy, businesses, and workers badly over the last two quarters, and it’s uncertain how quickly we’ll recover.
We knew that Q2 GDP numbers (Gross Domestic Product) were going to be horrible. In fact, in May, the Federal Reserve thought they were going to be even worse.4
So, ~33% down is actually better than expected.
But, despite the headline, we didn’t actually “lose” 33% of economic production last quarter. The Commerce Department reports data on an “annualized” basis to make it easier to compare; so, if you looked at it quarter-over-quarter, the economy lost 9.5% since Q1.5

That’s still an eye-watering blow to the economy, but it’s not an apocalypse.
The largest contributing factor to the economic losses was a steep drop in personal spending, particularly on services, which makes complete sense in a shutdown.6
Three points before we move on:

  1. This is an advance estimate for Q2, and we will see revisions as more data is finalized.
  2. Though this is the sharpest drop in the shortest time in history, it was caused by the shutdown, and we’re already climbing out of it.
  3. 63.8% of economists think Q3 is when we’ll see the recovery really pick up steam, and the current forecast is for 15.2% annualized growth this quarter.7

So, what’s up with markets?
We think markets are being driven by a few big trends.
In a previous note, we mentioned what a Nobel-laureate economist calls “FOMO mania” by investors who fear missing out on the bounce. We think that’s still in effect as investors continue to pile into stocks, especially in the tech sector.8
We also think the market is being supported by massive government spending and Federal Reserve intervention.
And thirdly, we think a lot of traders are betting heavily on the recovery. If states have to shut down again, the collective delusion may collapse and trigger a correction. We’re watching for that.

How long will the rally last? That’s anyone’s guess. We’ve seen many cheerful forecasts predicting new all-time-highs. We’ve also seen plenty dolefully predicting the next crash.
With so much unknown, they’re all guesses. Even in less-murky circumstances, the market gurus are only accurate about 47% of the time.9
So, since we can’t predict what’s going to happen in Q3 and Q4, we’re staying agile and focusing on the fundamentals of good planning.

We know, it’s a really boring answer. But that’s how we give ourselves the best opportunity for success in chaotic times

We thank you for your trust and look forward to continuing to serve  you. If you have specific questions regarding your account, please contact your advisor. 

P.S. Apple recently announced a four-for-one stock split.10 Here’s what that means: Stock splits are “cosmetic,” meaning they don’t change anything fundamental about the company. Splits just make the stock more accessible to investors by lowering the price (like getting four quarters for a dollar). If you currently own Apple stock, you’ll receive three more shares for every share you own in late August. Have questions about it? Let us know.

Investing involves risk including the potential loss of principal. No investment strategy can guarantee a profit or protect against loss in periods of declining values. Past performance does not guarantee future results.
This material is for information purposes only and is not intended as an offer or solicitation with respect to the purchase or sale of any security. The content is developed from sources believed to be providing accurate information; no warranty, expressed or implied, is made regarding accuracy, adequacy, completeness, legality, reliability or usefulness of any information. Consult your financial professional before making any investment decision. For illustrative use only.
Opinions expressed are subject to change without notice and are not intended as investment advice or to predict future performance.

PFG Private Wealth Management, LLC is a registered investment adviser.  Information presented is for educational purposes only and does not intend to make an offer or solicitation for the sale or purchase of any specific securities, investments, or investment strategies. This material and information are not intended to provide tax or legal advice.  Investments involve risk and, unless otherwise stated, are not guaranteed.  Be sure to first consult with a qualified financial adviser and/or tax professional before implementing any strategy discussed herein. Past performance is not indicative of future performance. 

Ep 19: Market Downturns And Recoveries

On This Episode

Today our discussion revolves around bull and bear markets. We will break down the basics of what each of these types of markets mean and take a look at some historic trends that are relevant to this topic.


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More Episodes

Check out all the episodes by clicking here.



PFG Private Wealth Management, LLC is an SEC Registered Investment Advisor. Information presented is for educational purposes only and does not intend to make an offer or solicitation for the sale or purchase of any specific securities, investments, or investment strategies. The topics and information discussed during this podcast are not intended to provide tax or legal advice. Investments involve risk, and unless otherwise stated, are not guaranteed. Be sure to first consult with a qualified financial advisor and/or tax professional before implementing any strategy discussed on this podcast. Past performance is not indicative of future performance. Insurance products and services are offered and sold through individually licensed and appointed insurance agents.

Here is a transcript of today’s episode:


Marc: Hey, everybody. Welcome into this edition of retirement planning redefined. Mark here once again with the guys from PFG private wealth, John and Nick joining me as we talk about investing, finance, and retirement from the confines of our own happy homes as we’re still on lockdown doing this thing here. Everybody doing okay? Doing safe, John, how are you bud?


John: I’m doing good. I’m doing good. How are you?


Marc: Not too stir crazy?


John: No, no. I get out a lot, do a lot of walking, some biking, and I got some kids to entertain me, so that might make me a little stir crazy, but not sitting in the house.


Marc: Yes. I see a lot of people doing the homeschool thing and they’re like, “Mommy needs a teacher work day bad.” All the moms that are doing homeschooling and whatnot. Mine’s grown, so that would be frustrating and kudos to those folks that are doing that. Nick, what about you? But how are you?


Nick: Pretty good. The area that I live in downtown in St Pete, the waterfront’s pretty close by, so I have been at least every other day either taking a jog or taking a walk over there. The water tends to put your mind at ease with it.


Marc: Isn’t it interesting how like … I mean, could you find the time to do that before? It’s almost like we do get this interesting time to reset and appreciate some of the little things that we just seemed to gloss right over before.


Nick: Yes. Living in the area, I’ve tried to make sure that I take advantage of it, but even with that I still hadn’t always. It’s interesting, you do see from the standpoint of … St Pete, it’s pretty well known. There’s a lot of waterfront parks, so they’ve done a good job protecting the waterfront and there’s definitely a lot more people. You can tell because I would try to snack a run during the day and that sort of thing previous times, there’s definitely more people out than was typical. People are doing a pretty good job of distancing themselves, but there’s definitely flocking to that sort of environment.


Marc: Yes, you’ve got to be careful, if you get too many in there, they’ll wind up shutting it down. They’ll lock it.


Nick: Yes.


Marc: I know, I saw that with a lot of places like here where I’m at, we’d go out to the lake or whatnot and you were allowed to go use the … the parks are closed, but you could go to the state parks, but you could go to the lake. You go get on the lake, you get on the boat, and then people were hanging out putting their boats together, chit chatting, and drinking beer or whatever the case might be. It’s like, no. Sure enough, they closed the lake. You’ve got a whole lake stay, stay apart from one another a little bit. Just right around your boat, do some fishing, whatever.


Marc: Don’t make a party out of it, but they did, so they closed the lake. Well, it is what it is. It’s part of this paradigm we’re living in. Hopefully, we’re getting closer. Every week is bringing us obviously bad news, but there’s some positives, there’s some things that are starting. We’re starting to see numbers decrease in places here and there, so hopefully that will continue on. We’re going to continue on with our ongoing series that we’ve been doing the last couple of weeks about just in general things to think about during this downturn. Guys, we’re going to pick it up this week with market downturns and recoveries. John, why don’t you kick us off with our friend, the bear, since we were in the long bull forever in a day it seemed like? Now, we’re hearing about the bear so much. Just give us an overview here.


John: Yes, so just want to define kind of what is a bear market and basically a bear market is when there’s a 20 percent drop from the recent peak. Let’s just say like a 52 week high, so when it drops 20 percent from that standpoint, we’re now considered in a bear market. Just a little bit of history. Since 1926, there’s roughly been about 16 of them and they happen on average about every six years or so. Just some tidbits. When you’re dealing with this type of bear market, and we’re probably repeating ourselves from our last sessions, but you never want to be selling off of your portfolio, especially at the bottom. It’s really important during this time frame just to remain focused and just remember it’s a longterm strategy. Just stick to your overall plan.


Marc: Okay. Those are some things to kind of keep in mind with the bear marker.


Nick: I would say too real quick, just one last thing on the bear market because we have gotten a few questions on it. Some people had asked about once they finally checked in on their 401K and they’re making their regular contributions, should they stop making those contributions, and will that help them? I’m quoting a few people here, but, “What’s the point of putting in the money if I’m just going to lose value on it in a week? Those sorts of things. That just has to do with averaging into the market, again buying on a discount. Even though it’s going down, the next contribution that you make will be able to buy in at a lower price. When things bounce back, buying in at those lower values are what help people bounce back faster.


Marc: Yes. It’s all part of the strategy, right? With every situation, you want to make sure that before you take any action of any kind that you’re checking with your advisor and how your plan is situated and set up or if you don’t have one, get one because that’s going to help you answer some of those questions as to how you may or may not want to look at different vehicles, different investment ideas, strategies, so on and so forth during anytime, but obviously during a downtime as well. Since we covered the bears, let’s talk about the bull. Actually, I think at the time we’re taping this, I saw that Germany posted and said one of their indexes pulled out of the bear. That might be encouraging news, but what’s a bull market, Nick?


Nick: Really, the bull is just kind of the opposite where we’re talking about a 20 percent increase in stock prices. Historically, there’s been around 14, about 14 bull markets. Really, these going to last for quite a bit of time. I mean, the reality is that post great recession of ’08, ’09, for all intents and purposes, we’ve been in a bull market situation for … a previous too, this coronavirus induced issue over a decade. The tricky thing with bull markets when they, especially one that lasted as long as the most recent one did, is people can become a little bit complacent. They can forget what feeling any sort of loss feels like or looks like. Again, redundancy can sometimes be annoying, but it does help to kind of get it to stick in people’s head. It goes back to the importance of the plan, sticking to the plan so that again we’re taking that into consideration and helping us make our decisions.


Marc: Well, if we’re going to talk about the history of a little bit, and John, you started to touch on in some of that, let’s jump in, kind of kick off, and discuss a few of the things because we called this market downturns and recoveries, so let’s look at a few of those, some of those I guess peak moments and how they looked on the down as well as on the upside.


John: One of the more famous ones is black Monday, October 19th, 1987. I was a little boy then, so I wasn’t really paying attention much to what was going on. For some of our listeners, they might remember. It was basically triggered by a computer as tradings and basically the fair evaluation of the dollar against Germany’s currency.


John: That kind of caused it and it was actually pretty quick compared to some other ones. It lasted about three months. In total, the S and P pulled back about 33 percent. In turn, we’ve talked about what follows the bear is typically the bull. Recovery took roughly 18 months and then as Nick mentioned, basically in the initial phase is when you see a lot of your gains, so in the first 12 months after that, the S and P gains were about 21 percent. That’s why it’s important to just stay the course and always stay invested because you don’t want to miss that initial upfront of the basically rally up.


Marc: Got you. We’ve heard a lot of comparisons to this one, the drop of 87 and the speed of it to what we saw obviously with the beginning of the coronavirus as well. We probably saw a lot of that on the news from time to time.


Nick: For sure. We just want to emphasize that this is not to be confused with the Showtime show, Black Monday, although for those that haven’t seen it, it is pretty funny. It is a very adult to show. In these times, if somebody is looking for a little bit of dark humor and levity, the TV show on Showtime’s really funny.


Marc: I’ll have to check that out. Let’s go to the big big boy here because that’s probably the one that’s most … obviously, besides this, fresh in our mind is ’08.


John: In ’08, the main trigger there that caused it was really the housing market in the US basically collapsed. That lasted really from late 2007 to 2009, roughly 17 to 18 months. The dip for the S and P from the peak was about roughly 57 percent down from the highs. The recovery took roughly three years or so, but the 12 months following the pullback, the S and P gained about 68 percent so again, important to stay invested because you just don’t know when that rally is going to happen.


Marc: Yes. The recession, that one … I think that’s where people also … guys, I’ll let you continue on with this analogy in a second, but I think that’s where people are really also just taken aback about how to handle this one because there were economic indicators with the other one. There really wasn’t with this, this is a completely different animal so it’s really hard to say how … we’ve heard them say it’s going to bounce back in a V. Some say it’s going to come back into U. As far as it’s going to come down, go flat for a while, then come back up sharply or whatever. It’s so hard to predict because this is a medical health thing. We really haven’t seen this before.


Nick: Yes, it’s definitely a different sort of situation. Probably a month back, we had sent out an email blast that talked a little bit about some of the previous pullbacks with health related or virus related things. Those were definitely different because we never had this sort of social distancing or…


Marc: Mass closing of businesses.


Nick: Yes. Mass closing and those sorts of things. It will be interesting to see the impact over the next 12 to 18 months. The market’s definitely been dialed in or trying to dial in to what sort of timeframe we’re looking at where people can start to kind of get back to work. There’s definitely much less intermediate term fall out in this so far than we had in the recession.


Marc: Well, some people would say that this was egged on, some of this has been made worse by the Trade Wars and all those kinds of things that we were working our way through that as you know at the end of middle of ’19, end of ’19. Going into ’20, I think we were supposed to start the phase one and all these different kinds of things, so there’s a little bit of data there too.


John: Yes. There was a pullback with the Trade Wars, trade war with China and stuff like that. That was also a pretty quick one where basically the downturn was about three months, S and P went down about 20 percent from the high, recovery was four months. Again, it just bounced back fast and basically almost 38 percent in the next 12 months following that.


Nick: Just for clarity on the time period, this was the fourth quarter of 2018 where the year had started off pretty good. Then, we had that quick drop in the last quarter-


Marc: After Christmas there, yes.


Nick: Their year end statement at the end of 2018. Then, 2019 was such a good year. Part of the reason it was such good year was because of that drop. It’s interesting because people remember how great 2019 was, but they tend to forget what happened at the end of 2018, which is like when your friends go to Vegas and they brag about what they won, but now what they lost. That sort of thing.


Marc: You’ve been talking to my wife again it sounds like because I haven’t been to Vegas in a long time with everything that’s going on. In general, a lot of the information if you’re going to take from this, that’s actually a good point about Q4. I mean, it dropped so fast around Christmas of ’18 and it was bouncing back pretty darn fast. You can miss those days. A lot of the data in there that John shared, it seems like within that first year, there was really potential for missing out on some of those best days. That’s where your timing in the market becomes such an issue. You’re not going to know that.


Nick: Yes. It’s really difficult in … even just the last few weeks have shown the importance of missing some days. There has been some studies and data where one example that we found was if somebody started with a hypothetical investment of $100,000 in 2000 and if they stayed invested in their same allocation the whole period of time, their balance would be at the end of that period, so it would have been at the beginning of this year, they would have been at about 324,000. In the study, the randomized data showed if they missed 10 days of upmarket performance and it was kind of spread out or the time, so it’s not a consecutive day thing. The balance instead of the 324K, had been closer to 162K. If they missed 25 days of the biggest, upswings, they actually would have lost money and ended up at about 82,000. The emphasis on that is really not necessarily the specific days and that sort of thing, but it’s really staying invested, not trying to time too much because somebody that just stayed the course and made good decisions throughout that time, they ended up benefiting the mos. Really, that has played out again over the last few weeks where we’re about 20 percent off the bottom as we speak right now. A lot of that’s come really between three or four days. Missing those days is not ideal.


Marc: Well, what’s the overall conclusion, the kind of lesson if you will, to take from some of this? John, any thoughts as we wrap up this week?


John: Yes. The overall conclusion of I think everything we’ve been talking about is really just staying invested and staying in your initial course of your overall plan, that cost financial plan. Then, that backs into your investment strategy. You really want to just stick to it as hard as it might be. You want to block out any noise that you’re seeing in the media, just focus on your overall goal, just stick to your, stick to your plan, and just really just try to stay invested as best you can. This is where it’s very important for people that are currently retired, that you’ve set up, I think Nick mentioned in one of our last sessions, a liquidation strategy where basically you have buckets to pull from during this volatile period so you don’t have to sell out on your stocks. You really just want to have everything coordinated correctly and again just stay the course.


Marc: Yes, I think that’s where a lot of people too get confused, right? I mean, when things like this happen, we see the market’s dropping or whatever, we start to panic, and we think what’s it doing to our retirement or our potential retirement. Again, depending on how your strategy was set up and how your plan … hopefully, you had one was in place. It may not have affected you as much as it maybe affected your neighbor who didn’t have one or so on and so forth. It really all comes down to working with an advisor, having a plan and a strategy in place that hopefully, again you had in place prior to this, but if you didn’t, don’t feel like you need to sit on your hands and wait until this is all done and over with.


Marc: I’ve seen email questions come in, in different places, different things. Should I not invest? I think Nick, you brought it up I think even last week on our last time on our podcast that, should you still be putting money into your 401k during this time period? All those kinds of things, get those questions answered for you specifically by working with and talking with an advisor. If you’re already working with John and Nick and you’re listening to the podcast because you’re learning more information, great. Then, you’re already on that right path. If you’re not, or you know someone who’s not working with an advisor, let them know, tune into the podcast, check it out, have them give them a call, and have a virtual meeting. Go through the process and see if there’s things that need to be tweaked or adjusted because we’re still going to want to retire.


Marc: I’m 50 and while I still got several years to go before I get to retirement, I still want to make sure that I’m planning for that. I want to get to that point and so I can’t let this thing just derail me entirely. Work with an advisor, have those conversations. (813) 286-7776 is how you can call and talk with John and Nick. They’ll get you set up for a Zoom meeting, go to meeting, or whatever kind of virtual conversation to get the ball rolling, but you can have a talk about your situation with the guys at PFG private wealth, (813) 286-7776 is how you call them.


Marc: Subscribe to the podcast. Go check them out at the website by going to PFGprivatewealth.com. That’s PFGprivatewealth.com. While you’re there, subscribe to us again on Apple, Google, or Spotify. Share it with someone who might benefit from the message, all that good stuff, and we’d certainly appreciate it. Guys, we’re going to get out of here this week. Thanks so much for your time. We went a little bit longer than usual, but that’s okay. Good information here this week on the show. John, appreciate you. Stay safe and stay well. Nick, you too, my friend. Enjoy those walks and we’ll see you soon.


Nick: Take care.


Marc: All right guys, take care. We’ll see you next time here on retirement planning redefined with John and Nick.







Ep 17: Planning Through Volatile Markets

On This Episode

We talked last time on some of the financial impacts the Coronavirus had caused, but now we will discuss how to plan to get through tough times and market downturns. John and Nick will talk about a few suggestions they have when they see situations like this and how to withstand a volatile market.

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PFG Private Wealth Management, LLC is an SEC Registered Investment Advisor. Information presented is for educational purposes only and does not intend to make an offer or solicitation for the sale or purchase of any specific securities, investments, or investment strategies. The topics and information discussed during this podcast are not intended to provide tax or legal advice. Investments involve risk, and unless otherwise stated, are not guaranteed. Be sure to first consult with a qualified financial advisor and/or tax professional before implementing any strategy discussed on this podcast. Past performance is not indicative of future performance. Insurance products and services are offered and sold through individually licensed and appointed insurance agents.

Here is a transcript of today’s episode:


Speaker 1: Hey everybody, welcome in to this edition of Retirement Planning Redefined with John and Nick from PFG Private Wealth. And boy, guys, welcome into yet another week of bizarro world. What’s going on? How are you?


Mark: Hey everybody, welcome into this week’s edition of Retirement Planning Redefined with John and Nick of PFG Private Wealth. Here today again to talk some more about the, well the coronavirus, like we can’t not talk about it. It’s the only thing going on in the world it seems like. And we’re going to talk about retirement planning for this volatile market.


Mark: So guys, welcome in. How are you this week? I’ll start with Nick. How’s it going bud?


Nick: Oh pretty good. Just trying to be a voice of reason for people during this crazy time.


Mark: Are you doing your part, staying safe, staying home, all that good stuff?


Nick: Yep, I [crosstalk 00:00:32].


John: So let me jump in here. Nick’s been doing his social distancing for the last three years so he’s pretty good.


Mark: Good stuff. How about you John?


Nick: For at least three weeks, at least three weeks.


Mark: At least three weeks? Yeah.


Mark: How you doing John?


John: I’m good, I’m good. I’m more upbeat today. I feel rejuvenated. I’m ready to roll.


Mark: Well that’s good. And that’s tough, that’s a challenge we’re all going to face because a lot of us have been doing this for about three weeks already and we’re looking at another month going through April at the time we’re taping this. We’ve still got a few weeks to go, so we’ll see how it plays out. But there’s news every day, it’s changing all the time. So we’ll see how this plays out. But we thought it’d be worthwhile to at least go through some conversation about retirement planning through or during this volatile market. So let’s just kind of jump in and talk about the overall importance of a strategy. Nick, I mean we talked about it long before this downturn happened and more than ever I think that it benefits to work with an advisor because it’s a little bit easier some would say when markets are up and things are good and everything’s going swimmingly well, than it is during downturns. And if you don’t have that roadmap, it certainly can make things more cloudy.


Nick: Yeah, it’s been interesting. John and I both started in the industry in about ’06, ’07, so right at the kind of onset of the recession. And after we kind of got through that period of time, people were still afraid of it and what happened in that period of time for three, four, five, six, seven years. And since the markets have been going up for so long, planning has become more prevalent and people have understood that it’s an important thing to do. It seems like some have done it almost because, okay, well this is what we’re supposed to do, so we’re going to do it.


Nick: And now the feedback that we’ve gotten from clients is that it’s really kind of clicked to them how important the planning is and how much peace of mind kind of re reviewing it and understanding parts that maybe they didn’t quite get when we first set up the plan or in the first couple of reviews, realizing the importance of the plan as we move through times like this after having kind of a smooth sailing decade really. So we can’t emphasize enough the importance of clarity and even just helping to avoid rash and unsmart decisions we can kind of put it that way. So the confidence level that we’ve seen for people that have a plan versus those that don’t, from the standpoint of we’ve been introduced to new clients and we’ve gotten referrals kind of through this period of time and it’s definitely a drastic difference.


Mark: Yeah, definitely.


Mark: Well John, let’s talk about some of the things that the plan determines. Let’s go through a few things to consider in there.


John: Yeah. We like to say the plan determines what type of investments you should be going into and what strategy within those investments. And that’s where Nick and I really try to focus on, “Hey, let’s get an understanding of what your needs and goals are. What are you trying to accomplish?” And once we determine that, secondary always comes the investments and one of the things that with the investments go, we try to curtail or develop a comprehensive strategy for each individual person because everyone’s different, everyone’s risk tolerance is different. But the plan really dictates how much risk you should be taking.


John: So we’ve had scenarios where basically we’re doing a plan and the person when we first meet they’re pretty aggressive and then when we do the plan it’s, “Hey your plan works very strong at four to 5% rate of return, so why are we taking all of this unnecessary risk?” So really when you do something like that, you could be putting more scenarios where failing happens in the plan because there was a pullback. So we really have the plan dictate how much risk you should be taking, which with our clients, if we see it working around four or 5%. Not that we just aim for that, but we kind of scale back on the risk we’re taking. Which I’ll tell you right now, some clients are appreciative of that strategy, of just saying, “Hey let me gear what I’m trying to aim for a rate of return based on my plan.”


John: Other things that we really look at is someone’s risk tolerance, which I think in the last month or so people’s risk tolerance kind of shifted a little bit because they saw some real volatility because we’ve been almost in that 10 year bull market with not a lot of pullback. So we really try to figure out, “Hey, what’s someone’s risk tolerance and how much can they mentally afford to lose?” There are some scenarios where we might stress test the plan and that’s a case by case depending on the individual. But it’s important that you kind of take a look and just stress test it to figure out exactly how will my plan work with any type of market pullback? And then we’re going to touch on this later in the next session next week, but importance of kind of building the right asset allocation in your overall investment portfolio.


Mark: Well Nick, a lot of people had the question, especially with the heavy downturns, it came so fast, obviously in response to the virus and so on and so forth. You have people saying things like, “Why don’t you just close the market?” Right? They want you to shut it down or whatever. And we thought, well we closed it a little bit during 9/11 but that was a little bit of a different scenario. But you’re effecting liquidity by doing that and that’s another key component to an overall plan is understanding liquidity as part of the strategy.


Nick: Yeah. So the speed at which this happened, one article that I read had pointed out that this bear market happened in half the amount of days as the one during the great depression, which was kind of an eye opening sort of thing to think about where it really only took us about 21 days to get here. And so the speed at which that happened, literally when you think about it, in between the time that people get their monthly statements, they’ve lost a significant amount of money. So to tie into the planning, and this is something that we’ve tried to reemphasize with clients as something that we take into consideration, but I think it’s also helped maybe shed a little bit of light on us spending a little bit more time talking about it with clients as we’re putting together the plan is having a liquidation order and a liquidation strategy.


Nick: And so what we mean by that is, people tend to look at their money as one pot of money and they don’t necessarily think about it as, some people refer to it as the bucket strategy and a lot of times that makes the easiest way to understand, where we have short term, mid term, long term money and in understanding that even if you are two years from retirement or in your first couple of years in retirement, et cetera, we still have a long time horizon. And we don’t just shut things down from the standpoint of the overall investment strategy and shifting the cash and those sorts of things.


Nick: So we try to review and make sure when we have clients that are taking monthly withdrawals, we usually look to set up six to 12 months of expenses, dependent upon the client, dependent upon what they’re comfortable with from a risk standpoint. Set up six to 12 months in their account of cash so that they know they have that income. The emphasis that we’ve made with clients on keeping a cash reserve where some feedback that we’ve gotten over the last few years, “Hey, interest rates are so low. This money’s just sitting there. I hate not having it do anything for me,” et cetera.


Nick: And we’ve kind of tried to hold the line and tell them, “Hey, we understand but that money will come in handy.” And really the peace of mind that people have when we go through it and we kind of walk them through. It’s like, “Hey, look at between the money that you have in cash in your bank account and the money that we have sitting in cash to be sending you your withdrawals, we have a year to two years worth of income without you having to sell any of your other holdings, which gives your money time to bounce back and not realize these losses that we’ve seen,” really starts to help people understand the importance of having that liquidation order and liquidation strategy.


Nick: And then also, from the standpoint of having the big broad based game plan, having a premise or an idea of when we’re going to start social security, but then understanding that, “Hey, when things change like they are right now,” saying, “Hey, let’s look at the numbers. Instead of us waiting another year and a half to start social security, let’s go ahead and get it fired up now. Let’s have that income start to come in that way you have a little bit more peace of mind, you have additional income coming in, we have to take less out of your investments.” And as difficult as it is for people to think in the way of, “Hey, now’s a good buying opportunity from the standpoint of your investments. Let’s let that money work for you and try to get as much bounce back as we can over this period of time.” So that liquidation order and how it fits into the broad based game plan has become really evident and important to a lot of people.


Mark: Well, and speaking of importance too, one of the things that we’re doing is we’re all hunkering down in place and staying safe, staying home, all these things that we keep hearing now, but we can’t just hunker down on our plan through this time period and just say, “Well I’ll get to it after things start to get better.” Right John? You want to revisit, you still want to have these conversations even during volatile periods.


John: Yeah, and one thing we’ve tried to do during these last few weeks is really reach out to clients, especially the ones that are retired or are knocking on the door of retirement and revisit their plan and just let them know that, “Hey, even with this pullback, this is kind of where you still stand.” And for the majority of them, they’re still in a good situation. Again, partly because we had some strategies in place for a downturn in the market saying, “Okay, well now that the market’s down, we have these other buckets, whether it’s cash or whatever it might be, where it’s not tied to the market and you can access it and let your investments recover.”


John: So I’ll say in our reviews, when we show people their plan still works, it actually really provides a lot of peace of mind and it helps them make better decisions not to cash out where it’s basically like, “Okay, you know what? Even though it’s dipped, the S&P’s dipped 20, 30% over this time frame, my goals are still going to be achieved so let’s go ahead and stay the course.” So that’s where it’s really nice just to have the plan in place. It’s something you can always take a look at and say, “Hey, I know that the market’s doing this, but how am I doing? And how is this going to affect my overall goals?” And when you evaluate it and say, “Hey, you’re still okay,” I think people feel a bit better about what they’re doing.


Mark: Yeah, I agree. And I think it goes a long way towards anything we’re doing whether you’re getting inundated with news every day on the virus and it’s driving you nuts and you need a reprieve or you’re getting inundated with market volatility or whatever. Sometimes having some clarity, having a calming voice, having someone to kind of talk you through some of these pieces certainly goes a long way. So it applies to your health, it also applies to your wealth. So reach out to the guys if you’ve got questions or concerns. That’s going to do it for this week on the podcast. We talked a little bit about, again, how to plan through this volatile market. We’re going to talk some more strategy on the next session. So make sure you subscribe to us on Apple, Google, Spotify, iHeart, whatever platform you choose.


Mark: You can find them by simply typing in Retirement Planning Redefined, if you’re using one of those apps and you enjoy a particular one versus another, just type that in the search box and you’ll find it. Retirement Planning Redefined. Or go to their website, pfgprivatewealth.com, that’s pfgprivatewealth.com and you’ll see the podcast page there. You can subscribe that way and get all the episodes as they come out, check out past episodes. And of course, as always, before you take any action, if you have questions or concerns, please check with a qualified professional like John and Nick before you do so, and you can reach them at 813-286-7776 at PFG Private Wealth. 813-286-7776. Guys, thanks for your time this week, I appreciate you, for John, for Nick. I’m Mark and we’ll see you next time on Retirement Planning Redefined.


Nick: Thanks Mark.


John: Thanks.







Market Volatility in Perspective

Financial markets have been roiled recently amid fears over the impact of the fast-spreading coronavirus. These near-term disruptions to economic activity are the result of efforts to contain it. We see a downshift in 2020 global growth, with uncertainty around the size and pace of slowdown. While there are always unplanned risks, we do expect a rebound in activity once the disruptions dissipate and don’t see it derailing the U.S. expansion at this time.

What are key takeaways for investors? First, we encourage investors to keep things in historical perspective. Second, know the importance of staying invested and avoid reacting in ways that could derail long-term financial goals. 

Keep things in perspective

To provide historical context, the table below illustrates how the stock market responded during other past growth scares and bear markets. It also shows the period of positive market performance in the 12 months that followed these crises.

Stay invested

The chart below shows how a hypothetical $100,000 investment in stocks would have been affected by missing the market’s top-performing days over the 20-year period from January 1, 2000 to December 31, 2019. An individual who remained invested for the entire period would have accumulated $324,019, while an investor who missed ten of the top-performing days during that period would have accumulated $161,706.

PFG Private Wealth Management, LLC is a registered investment adviser.  Information presented is for educational purposes only and does not intend to make an offer or solicitation for the sale or purchase of any specific securities, investments, or investment strategies. This material and information are not intended to provide tax or legal advice.  Investments involve risk and, unless otherwise stated, are not guaranteed.  Be sure to first consult with a qualified financial adviser and/or tax professional before implementing any strategy discussed herein. Past performance is not indicative of future performance. 

This material represents an assessment of the market environment as of the date indicated; is subject to change; and is not intended to be a forecast of future events or a guarantee of future results. This information should not be relied upon by the reader as research or investment advice regarding the funds or any issuer or security in particular.
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Prepared by BlackRock Investments, LLC, member FINRA. This material is provided for educational purposes only. BlackRock is not affiliated with any third party distributing this material.

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