If you have worked with us in the past and we previously provided investment advice for you, we did a thorough analysis of your portfolio and recommended investments that were consistent with your risk tolerance, time horizon and goals. Unless you need to raise cash “soon” (i.e. for a remodel or large expense) or you have recently come into some money that you want to invest, we are not recommending rebalancing portfolios at this time. Given the US equity market is entering correction territory, there really isn’t anywhere to rebalance into.
Our best advice is to take a deep breath.
A little perspective goes a long way
As of March 17th, the S&P 500 Index is down about 4% and the Nasdaq 100 is down about 6%. Much of this volatility is driven by individual and institutional investors either taking profits or anticipating negative growth in certain businesses or sectors due to the threat of tariffs. While it is unsettling to see the market go down, the asset allocation that we recommend is built to withstand market ups and downs. The 10-year annualized return for the S&P 500 is 12.5% and the 10-year annualized return for the Nasdaq 100 is 17%. In fact, the last ten years have not been smooth sailing for the markets – we have experienced COVID, supply chain inflation, various military conflicts and different political administrations, to name a few. Yet if you were invested “in the market” during that time your portfolio has more than doubled. It is nearly impossible to time when to sell and then when to get reinvested.
Rumors vs. Facts and Jumping to Conclusions
Another opportunity for deep breathing! President Trump created the Department of Government Efficiency (DOGE) which is focused on cutting costs and eliminating inefficiencies in government.
One of the agencies that has been targeted is the Consumer Financial Protection Bureau (CFPB). Established in 2008, the agency was tasked with protecting consumers from financial abuse and launched initiatives to eliminate or reduce overdraft fees, lower credit card late fees and protect consumers from unfair lending practices. President Trump has said he wants a plan to ‘right size’ the agency, not eliminate it completely. Even if the agency IS shuttered, the government still has the means of pursuing wrongdoing at financial firms. Fraud is illegal and was illegal before CFPB was created. Any cases of fraud could be prosecuted by the Federal Trade Commission and the Department of Justice.
This is an entirely different entity from the Federal Deposit Insurance Corporation (FDIC) which was created 92 years ago to provide deposit insurance on consumer bank deposits. Recent news indicates that the FDIC is targeted for a 10% workforce reduction but there is NO indication that the FDIC would be dismantled or that FDIC insurance on bank deposits would be eliminated. Banks actually pay FDIC insurance premiums to provide the insurance to consumers and there are no plans for this practice to stop.
Similarly, the current administration is focusing on increasing efficiency and lowering the costs of running the Social Security Administration NOT cutting participant benefits. We have yet to see if there will be any action on a campaign promise to reduce taxes on social security benefits. DOGE appears to be focused on finding abuses in the system (i.e. payments to people who are no longer living) and making those corrections as soon as possible. They are looking at cutting costs via labor associated with the call center.
Lastly, we’ve heard clients concerned about potential cuts to Medicare, Medicaid or Covered California. While the budget proposal from February of this year called for an $880 billion decrease in the budget, the White House has made a commitment NOT to touch Social Security, Medicare or Medicaid. The president has reiterated this many times. That said, under DOGE they are focusing on scrutinizing those programs to identify and eliminate “fraud, waste, abuse and inefficiencies.
So….what should YOU do?
NOTHING!
The worst thing you can do is “panic” and sell investments when they are going down. It really is best for your mental state to just ignore the daily ups and downs and focus on the long term. (Easier said than done we know but it is the truth!) Also, it is important to consider your news source. Media outlets exist by selling advertising and if they can create more fear and anxiety and get more repeat viewers then they can sell more advertising.
We encourage you not to get caught up and cause yourself unnecessary anxiety and worry.
As I recently told a client, ‘Its time for all of us to go take a nice long walk in the woods 😉.’