Signs of danger are all around us. The threat of Federal Reserve tapering, the possibility of military action in Syria and rising rates are giving many investors pause as they look toward the end of the third quarter. What’s an investor to do? What’s an advisor to recommend?
Embrace risk, of course.
As we’ve seen time and again, the contrarian approach to investing—buying when others are selling, and rebalancing as markets peak—yields the most reward over the long haul. Though interest rates have increased, they are still quite low and are hardly a decent alternative to current dividend yields. Fundamentals haven’t changed, and though stocks have a lot to prove at the next earnings season, economic growth in the U.S. and Europe is a long-term positive for equity prices.
If your clients were fortunate enough to be under-allocated to stocks in August, take this opportunity to rebalance. After all, timing the market is a fool’s game. Though we still think volatility will remain at elevated levels in the short-term, exposure to risk assets is the best long-term way to build wealth.