The markets may consistently throw curveballs, but investors should not let emotions drive their decision-making.
In a recent research note, Kristina Hooper, Chief Global Market Strategist at Invesco, highlighted six tips to help investors better weather market anxiety for a potential increased volatility ahead.
For starters, Hooper warned that investors should anticipate heightened market volatility. Since there are a number of lingering points of concern, such as rising Covid-19 cases, those that have already planned for uncertainty will be less likely to be affected by it.
There is always a positive along with the negative. While the election count has dragged on, Hooper noted that we will definitely be certain of the final tally by Inauguration Day in January. Meanwhile, the next installment of the economic stimulus relief is a matter of “when” not “if.” On the coronavirus front, despite rising cases, we have also seen lower mortality rates.
Don’t make major portfolio changes in response to these short-term, fear-driven trades. Hooper does not see a lasting impact on asset classes, so investors should stick to long-term goals.
On the other hand, there may be new opportunities to be found. The uncertainty and volatility can create opportunities to enter markets at cheaper entry points, or reposition to capture new growth trends as a result of these drastic changes.
Remember what matters most. Hooper underscored the importance of monetary policy when it comes to capital markets. Institutional investors have also highlighted fiscal policy, the presidential election, and Covid-19 infections, along with monetary policy, as the most important issues of the day. While we may witness selling on short-term volatility, the overarching theme of supportive monetary and fiscal policies will help support the markets ahead.
Lastly, Hooper advised investors to try to just relax.
“Pandemics, consequential elections and poor fiscal policy choices have all occurred before, and yet the stock market has survived and risen over time,” Hooper added.
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