Joe Tigay Keeping Emotions at Bay: Prioritizing Client Needs in Volatile Times
As financial advisors, we’ve all witnessed the emotional rollercoaster investors can experience, particularly during periods of political and social unrest. The recent attack on July 13th exemplifies this perfectly.
A Market Detached from Reality?
Traders, understandably, are searching for opportunities to capitalize on the event’s potential impact on certain industries. This aligns with the market behavior following the January 6th Capitol riots, where the Dow Jones surprisingly closed at record highs.
Many see this attack as a potential boost for Trump’s re-election campaign, mirroring the “sympathy bump” President Reagan received in 1981. This has led to increased trading activity in companies associated with Trump, such as Bitcoin, Tesla, gun manufacturers, and Truth Social.
A Historical Anomaly
What’s truly unusual is the market’s reaction compared to past presidential assassination attempts. Historically, the Dow has fallen after such events – 1.4% after Reagan, 4.3% after FDR, and 2.9% after JFK. The average decline across 10 such attempts (1912-2005) is 1.1%. This current market rally (up 0.53% on Monday and 1.63% on Tuesday) is a clear departure from the norm.
Normalization of Violence?
This deviation likely reflects a desensitization to political turmoil and violence in modern society. However, the road to November remains unpredictable. Economic factors like a strong economy, lower inflation, and potential interest rate cuts all contribute to the uncertainty.
Staying Focused on Client Needs
Regardless of the market’s motivation – short squeezes, tax cut expectations, inflation fears – volatility is inevitable. Our duty as advisors is to remain calm and prioritize our clients’ needs. We must resist the urge to chase emotional market swings and instead, focus on long-term investment strategies and risk management.
As tensions escalate and October approaches, the only surprise will be the absence of surprises. Let’s be prepared to navigate this volatility with clear heads and unwavering commitment to our clients’ financial well-being.
