Even though we generally try to avoid making predictions about the economy we are often asked to do just that. I recently received an email from a client that went something like this:
I’m hearing more and more about (fill in the blank with the market guru of your choice) dire predictions for the markets in 2015-2016. Is there anything we should be doing now?
As I read some of this person’s articles, in summary he warns of the “next crisis,” which he predicts may occur in 2015 or 2016. He claims the next correction, when it comes, will be worse than 2008 because the Government debt is so much higher. He’s nailed down this apocalypse to occur anytime between 2015 or 2016 and predicts it to be “really bad.” His advice is simply “be prepared, be worried and be careful.” My client wanted to know what I thought about this.
Here is my response to her:
I have read some of Mr. Guru’s thoughts. He is assuming that our debt will continue to increase and nothing will be done to balance the budget and begin the process of paying down the debt. He may be right. He is certainly correct that if the debt continues to increase that it will eventually become unsustainable. Will that time ever come? If so, when will it come? I don’t know the answer to those questions and I’m not sure anyone else does either. The stock market and our economy is always at risk of some unknown crisis we can’t predict and that is why we recommend a much diversified investment portfolio. The alternative is to wait out every dire prediction in cash to see if they actually happen. The problem with this approach is that we’d always be in cash! Many investors haven’t saved enough for retirement and need the potential growth of the stock and bond markets. A well-diversified portfolio won’t guarantee your balance won’t drop in a market correction or during a recession but over the long run it’s likely to get you better returns than cash. My advice; stay the course, stay diversified and don’t worry about every dire prediction you hear. The reason we don’t like to make predictions is that most of them never come true.
Linda Eden is a Registered Principal offering securities through Cambridge Investment Research, Inc., a Broker/Dealer, Member FINRA/SIPC. Investment Advisor Representative, Cambridge Investment Research Advisors, Inc., a Registered Investment Advisor. Legacy Wealth Management, LLC and Cambridge are not affiliated. Cambridge does not offer tax advice.
Copyright ©2013 Linda Eden. All Rights reserved. Commercial copying, duplication or reproduction is prohibited.