The chance of a geo-political event happening outside of the United States is always a risk to our stock market here at home. Now, however, the table has turned and it appears we are experiencing a crisis from within, and the markets are beginning to react. Let’s separate ourselves for a moment, take a step back, and consider the current events in the eyes of an outsider. Here is what we see.
1. It doesn’t pay to jump into the middle of a crisis, particularly in the early phase of events. Be patient and wait to see if there’s a climax to the story and events unfolding. That will be your buying opportunity.
2. Don’t sit, watch, and do nothing. Even if it’s just making sure you are buying safe and income producing bonds in lieu of cash, it can be a money-making opportunity.
3. Extreme market volatility usually comes with price dislocation, meaning not all stocks and assets go up and down equally. This can be a prime time to rid ourselves of under-performing securities and replace them with more attractive investments.
4. Evaluate your investments from a higher level. We build portfolios to withstand these types of disruptions, yet it’s always productive to analyze how things hold up when a crisis unfolds. This can be very useful information to help make an adjustment when things settle down.
Our intent is to stay disciplined and follow our own advice. Though these recent events may look and feel different to us, from an outsiders’ perspective this is simply a geo-political event that has raised the level of uncertainty to very high levels. At some point this uncertainty will diminish and the markets will find their normal footing. Until that time, we have no intention of letting a good crisis go to waste.