Markets & Economy Changes Impact Financial Planning by LPL Financial Advisor Joseph Krier CFP®

www.krierwealthmanagement.com

Don´t Lose Focus – change with the times but be aware of investor psychology

One of the oldest sayings on Wall Street is, "The most dangerous words on Wall Street are: This time it´s different." That saying, in all its simplicity, refers to the fact that people get overexcited at market tops or overly pessimistic at market bottoms. The phrase is over-used these days to include all sorts of investor behavior.

A much more legitimate phrase that I´ve heard several times of late is, "Markets change, human behavior does not." This makes much more sense as every market and economic situation has its nuances, but human behavior changes very slowly.

The keys changes we see in this environment can be broken down into two categories,

1) economics and 2) investment products.

On the economic front, the biggest issue is debt. American households as well as the U.S. Federal Government are carrying record levels of debt. There is no possible way that this will not affect behavior in the years to come. While it is possible to say that record debt levels have been dealt with multiple times in our history, the acceleration of total debt is currently way beyond any reasonable comparison. The interest payments on that debt will impact all of us for many years.

A close second on economic changes is the pace of change in globalization. As long as I´ve been in the money management business, I´ve been hearing about the China economic ´miracle.´ For many years I waited and observed slow progress toward this explosion of activity and it seemed never to occur…until about 5 years ago. Around the world developed and developing economies are more dependent on each other than ever. This has many implications, but for now, let´s just call it change. As your interdependence grows, the way we spend and save will also grow and this will greatly impact the investment markets. Going forward, it is likely that the economies that are best able to manage their debt and their growth will have a strategic advantage.

As for human behavior, the only real change we´ve seen is the quickening pace of our impatience. We want it all and we want it now. It could be said that the pace of change in technology of various sorts has been exponential. This is mirrored in our behavior. Our need for immediate results impacts our decision making in a negative way…unless we can sit back, observe and rise above the ´madness of crowds.´ Clearly, investor and market psychology, the difference between perception and reality, drives wild swings in days weeks, months and even years.

As the infamous Fear-to-Greed pendulum swings, it is imperative to put everything in context and observe both the realities of economics and the impact of perception. It is of key importance to determine what has and has not changed and to make decisions and/or seek financial advice accordingly.

www.krierwealthmanagement.com

The opinions voiced in this material are for general information only and are not intended to provide specific advice or recommendations for any individual. To determine which investment(s) may be appropriate for you, consult a financial advisor prior to investing. All performance referenced is historical and is no guarantee of future results.

Joe Krier is President of Krier Wealth Management, a firm with financial consultants registered in 23 states, providing asset management services and estate management services as a Certified Financial Planner, and can be reached at 800-624-2376. Securities and Advisory Services offered through LPL Financial Member FINRA/SIPC.