The stock market has the potential to reach a milestone if the Dow Jones Industrial Average hits 40,000. However, concerns are rising among investors about a possible pullback. A recent CNBC survey found that 61% of investment professionals believe the market has risen too quickly and a market drop could be imminent. Experts are divided on the possibility of a pullback, with some suggesting it may be a temporary correction rather than a prolonged bear market. For investors holding cash, certificates of deposit, or bonds, a pullback could present an opportunity to invest in the market.
Despite worries about the impact of the upcoming presidential election on the markets, experts believe those concerns are misplaced. Market performance is more likely to be influenced by factors such as interest rates, corporate earnings, and economic growth rather than political outcomes. Financial advisors recommend focusing on personal goals rather than external events. Diversification is key to weathering market uncertainty, according to Morningstar’s Christine Benz. For young investors, diversifying into non-U.S. holdings or global market capitalization funds may provide protection. Older investors can consider adding higher fixed-income yields and safer assets to their portfolios to cushion against potential market downturns.
For investors approaching retirement or already in retirement, having safeguards in place is crucial. Building a portfolio with a mix of assets based on personal timelines is essential. Financial goals that are less than five years away may not be suitable for stock market investments, according to experts. To determine the right portfolio allocation based on age, following the rule of 120 – subtracting your age from that number – can provide guidance. Rather than reacting to market fluctuations or news events, establishing a schedule to review portfolio allocations annually is recommended.
Overall, the market is at an inflection point where a pullback could occur after a sustained rally. Investors are advised to remain focused on their long-term investment goals, rather than getting caught up in short-term market fluctuations. While concerns about the impact of the upcoming election on the markets persist, experts believe that political outcomes are unlikely to be a long-term determinant of market performance. By maintaining a diversified portfolio and focusing on personal financial goals, investors can navigate market uncertainty and protect their investments against potential downturns. Establishing a solid financial plan and regularly reviewing portfolio allocations can help investors stay on track and weather market turbulence.
