{"id":744,"date":"2017-11-08T17:57:23","date_gmt":"2017-11-09T01:57:23","guid":{"rendered":"https:\/\/chaltenadvisors.com\/blog\/?p=744"},"modified":"2018-02-28T13:13:00","modified_gmt":"2018-02-28T21:13:00","slug":"im-nearing-retirement-and-the-stock-market-is-at-an-all-time-high-what-should-i-do","status":"publish","type":"post","link":"https:\/\/chaltenadvisors.ca\/blog\/im-nearing-retirement-and-the-stock-market-is-at-an-all-time-high-what-should-i-do\/","title":{"rendered":"“I’m nearing retirement and the stock market is at an all-time high….what should I do?”"},"content":{"rendered":"

On October 19 Fortune published an article with the headline:<\/p>\n

“30 Years after Black Monday, the Dow Hits an All-Time High”.\u00a0 <\/strong><\/p><\/blockquote>\n

The article goes on to\u00a0speculate:<\/p>\n

“only time will tell if we have another crash ahead of us. But in the meantime, investors seem to think that skepticism and caution may be just what we need to avoid one.”<\/p><\/blockquote>\n

Connecting the all-time high to the Black Monday crash from over 30 years ago smacks of the kind of fear driven nonsense that characterizes much of financial markets journalism these days.\u00a0 The article raises the temperature further by pointing out that:<\/p>\n

“this marks the fourth thousand-point milestone for the Dow this year, painting a very different picture than what was seen in 1987.\u00a0 According to the Wall Street Journal, the Dow had never before hit more than two of these milestones in a year.”<\/p><\/blockquote>\n

Transforming meaningless data points into blood pressure raising insights is\u00a0a coveted skill\u00a0for both market journalists and stock market analysts alike.\u00a0 After all it’s their jobs to get people to act – stock analysts to compel trades, journalists to\u00a0direct readers\/viewers\u00a0to the skilled money managers that advertise in their pages or on their programs.<\/p>\n

I’d be a poor headline writer.\u00a0 The first one I came up with, “Dow Hits an All-Time High\u00a0more than 500 Times\u00a0Since 1987 Crash” wouldn’t inspire much fear or anything else.\u00a0 The fact is that markets go up\u00a0most of\u00a0the time as is clearly displayed in the index data series shown below courtesy of Dimensional Fund Advisors.<\/p>\n

\"Long<\/a><\/p>\n

\"Long<\/a><\/p>\n

All time highs are run of the mill business for indices in most asset markets.\u00a0 But that doesn’t stop people trying to\u00a0misrepresent the significance of a fairly mundane data point.\u00a0 Some even try to either directly or indirectly take credit.\u00a0 It’s clearly been a favourite tactic of Donald Trump since he’s become president.\u00a0 This straight from the Trump playbook in August:<\/p>\n

“I just want to state that, as you probably have noticed, the stock market hit an all-time record high today.\u00a0 Over 22,000.\u00a0 Again, today, the stock market hit the highest level that it has ever been.”<\/p><\/blockquote>\n

And he wasn’t even talking about the economy or taxes at the time.\u00a0 Rather, he was announcing an immigration plan.\u00a0 \u00a0Surely there’s a Saturday-Night Live sketch in there somewhere!<\/p>\n

Others are a little more transparent in their use of the tactic.\u00a0 I love this headline from Annuity Watch<\/strong> in March of 2013 which warns:<\/p>\n

“Stock market reaches all-time high, but now is not the time to celebrate.”\u00a0 <\/strong><\/p><\/blockquote>\n

The article was quick to point out that:<\/p>\n

“the previous high was hit back in October 2007 when the country was mostly blind to the upcoming financial crisis.”<\/p><\/blockquote>\n

And of course the way the article suggests to avoid falling off the cliff of the next and imminent financial crisis is….you guessed it……to leave the stock market’s perils behind and purchase an annuity instead.\u00a0 That all time high in March of 2013 was of course when the Dow had hit the dizzying height of 14,253.\u00a0 If that wasn’t the time to celebrate, is it now?\u00a0 Probably not if you’d bought an annuity in 2013.<\/p>\n

The bottom line is that those who try to attach significance to data points like “All time highs” are trying to get you to do something or think something that is in their best interest, not yours.\u00a0 The market is pretty regularly hitting all time highs.\u00a0 It just doesn’t tell us anything about what’s going to happen in the near term future.<\/p>\n

That doesn’t mean you shouldn’t be concerned about the pattern of stock market returns as you approach retirement.\u00a0 The market will go down at times and\u00a0could go down significantly.\u00a0 As you approach retirement you need to be especially certain that your investment portfolio is attuned to your need, willingness and ability to take risk as it may be your main\u00a0source of income.\u00a0 Some important things to keep in mind are:<\/p>\n