Keep market-moving headlines in perspective
- News headlines can cause market movement, but knowing how to respond can help you stay on track to achieve your goals.
- Answer three questions to know when you should respond to market-moving headlines.
- Work with your Ameriprise advisor to develop a diversified investment strategy based on your long-term financial goals.
During your busy day, an alert sounds on your smartphone with geopolitical news that could affect your investments. You might wonder about the potential impact to your portfolio and how much time you have to react — or whether you should react.
By working with your Ameriprise advisor, your decisions can better reflect the goals, risk tolerance and time horizon you factored into your investment strategy at the outset and as you’ve adjusted along the way.
A well-diversified portfolio can offer you the perspective and time to make objective, goal-focused decisions. By looking beyond the headlines and the emotions they can provoke, you could potentially limit the negative impact to your long-term investments.
Sound investment decisions are based on informed and rational reactions to financial updates and analysis, not just the headlines. However, keeping news in perspective can be easier said than done. Our hyper-connected world continuously informs us of developments that may cause us to panic, even when we’ve built a well-planned investment strategy with a financial advisor. “Most of what we get today in the news is just noise,” says Colin Moore, global chief investment officer at Columbia Threadneedle Investments. “It’s not a material change in economic direction, and therefore you shouldn’t really be reacting to it.”
While daily headlines and news can give the impression that short-term events have a large impact on your portfolio, it’s important to keep headlines in perspective. What happens at one moment in time could reverse or materially shift just a few weeks or months later. For example:
- In the first eight weeks of 2019, the technology, energy and industrials sectors generated the best performance out of the 11 sectors that make up the S&P 500 Index.
- However, these sectors were the worst-performing segments of the market during the severe equity market sell-off during the fourth quarter of 2018 — arguably fueled by fears of a recession, higher interest rates and trade tensions.
When should you respond to market-moving headlines?
Most big news events don’t have a large impact on the global economy, even if they’re a cause of significant short-term turmoil — but some do.
When you’re unsure about whether a portfolio adjustment is warranted, begin by asking yourself three questions. If the answer is yes to any of these questions, there could be a longer-term effect on asset values. If the answer is no, the news story — and its effect on your portfolio — will most likely pass.
- Is a superpower involved? If the one of the top five — the United States, Russia, China, Germany, United Kingdom — is involved or has the potential to be quickly drawn into a situation, there’s potential for longer-term concern.
- Is there a risk to oil prices? Oil is the most important commodity in the world, providing fuel that keeps industry and transportation systems moving and economies growing. Prices could spike upward if turmoil causes a significant disruption to supply.
- Is there a risk to the global financial system? The global economy could begin to seize up if an event looks likely to undermine confidence in systemically important banks. Also watch for whether key global currencies and banks can’t take deposits, lend money, facilitate payments or support cross-border trade.
Check your investment goals and strategy regularly
When a headline concerns you, remain grounded and realistic by asking yourself:
- “Will my investment objectives be materially affected by ups and downs in the market?”
- “Am I still comfortable with the amount of diversification and risk in my portfolio?”
- “Do I have time to recover losses before I begin using my investments for retirement income?”
Partner with your advisor
During a period of market movement, talk with your Ameriprise advisor to see if any action is needed. Your advisor can help you make objective decisions based on your long-term financial goals and a diversified investment strategy. Together, you can cut through the noise of news headlines and stay on track to achieve your goals.d stay on track to achieve your goals.