Get ready for some major market turbulence ahead!
As I watched the market action this week, I was reminded of a time I took my friend Jim up for a scenic flight.
We had clear skies, but there was a bit of turbulence and a crosswind in the forecast. I had flown in situations like this plenty of times, but this was Jim’s first time in a small plane.
Not a great day for an inaugural flight.
Jim handled it like a champ though… He even took the controls and did some turns when we reached altitude.
But as we came back to the airport for our landing Jim started getting pale. We had to set up for a crosswind landing, which meant “crabbing” the plane towards the runway with our nose pointed sideways into the wind.
“Zach, are we going to be ok?!? Are we going to make the landing?!?“
I still kid Jim about the panic on his face that day. But even though it was a bit of a bumpy ride, we stuck the landing.
That’s exactly what I’m shooting for with our investments for the rest of this year.
Here’s How to Handle Market Turbulence
During my pilot training, I learned a lot about flying through turbulence.
Probably the most important lesson was to make gradual adjustments to the controls.
If the wind pushes you to the left, slowly guide the plane back to the right. And if an air pocket drops the plane below the planned altitude, gradually add power to climb.
Here’s why:
When pilots make adjustments too quickly, they often over-correct and then wind up being pushed off-course the opposite direction. Plus, in a turbulent environment, the next bump might push you back to your original course.
So it’s smart not to let any single shift lead to a major corrective action.
The same is true for your investment portfolio.
With so much market turbulence, you only want to make minor adjustments.
For instance, you might think technology stocks are now oversold and ready to bounce. Consider adding a third of your position on Monday, another third of your position next week, and the last third next month.
That way, if there’s another leg lower before the rebound, you won’t have your full position trading lower. And by next week, you’ll have more information to help you make a wiser decision with your second trade.
Similarly, don’t bail out of stocks all at once when risks show up. Often by the time you understand the risks, markets will have already dropped. And you may be able to use a bear market rally (like the one we’re in right now) to lighten up at a better price.
Market Turbulence Will Continue This Year
Investors have a lot of crosswinds (or crosscurrents) to evaluate.
This week, the Fed hiked interest rates by 75 basis points for the second time in two meetings.
The intent is to make it more difficult for consumers and businesses to spend. This is the fastest I’ve seen the Fed hike in my 20-plus-year investment career!
But at the same time, Chairman Jerome Powell implied that the Fed may take a much more dovish tone with future rate decisions.
Meanwhile, the latest GDP numbers indicated our economy is in recession. Scary, right?!
Except the markets have already traded lower in anticipation of this recession. And now we’re in the middle of a strong bear market rally.
Inflation readings have been high. But prices for gasoline, industrial metals, and homes are either stabilizing or moving lower.
See what I mean about a turbulent environment?
Managing the Turbulence With Stable Investments
For the rest of the year, investors will be adapting to this new environment.
Some will make wild adjustments — and likely lose money in the process. (Don’t let that be you!)
Others, will make steady adjustments as the information comes in. And those adjustments can help you reduce your risk, grow your wealth, and navigate this period with a lot more confidence.
I’d like to help you manage this market turbulence and stick the landing.
For me, that means investing in quality companies that generate reliable profits and pay generous dividends.
It also means using investment strategies that are proven to help generate extra cash flow from high-quality stocks. (This is the strategy behind my Accelerated Income Trading Model)
Bottom line, please don’t panic like my friend Jim.
Make careful and proactive adjustments. Don’t get thrown off by a few bumps along the way. And keep your eye on the goal ahead!
Here’s to growing and protecting your wealth,
Zach
