Apr 20, 2017 3 min read

There is growing concern about stock market valuations. First, I see more clients concerned this bull market might be nearing a correction. If you will need to spend your market money in the next two or three years, this might be a legitimate concern. We have gone over sequential risk in past columns. That is when the market makes a major dip at the beginning of your retirement cycle. You could be short of your planned retirement goals.

On Wall Street, you can find all kinds of analysts. Some said that rally is actually just beginning. That opinion is a little foolhardy considering we are up more than 250 percent since the 2008 crash. There may be some room to grow, but it will not go on forever.

Other Wall Street analysts think we are closer to the end of the bull market. Last week, the Federal Reserve Board said it thinks the market is overpriced compared to historic indicators such as price earnings ratios. The Fed also said it plans to keep increasing interest rates and is planning to start unwinding its balance sheets. The Fed bought trillions of dollars of bonds during the three quantitative easing programs. Both of these actions could have major impact on both the stock and bond markets.

Last fall, when Brexit took place, I was asked by the newspaper if I thought that was the beginning of the correction. I said no, because that was a long process. I said rising interest rates was a more likely stimulus to a downturn.

The world is in a state of uncertainty. The optimism that was generated with the change in Washington is realizing how hard change can be. Many old policies are not working efficiently, yet new ones to replace them encounter difficulty winning concession.

The litmus test might be what investors are showing with their actions. We are seeing falling Treasury yields as investors rush to move their money to safety. It is expected the 10-year yield could reach 2 percent.

People are concerned about what is happening in North Korea. During the Cold War with the Soviet Union, both sides were pretty secure in thinking the other would not start something that would end in mutual destruction. That may not be the case in North Korea.

There are going to be new elections in France and Great Britain. This creates some uncertainty in world politics. Goldman Sachs had a rare earnings miss this week that helped to spook the markets. Almost every day we hear of another retail chain closing a number of stores. A longtime Pittsburgh industrial client was recently in the news for the wrong reason.

Yes, we are in an uncertain world. Make sure your investments match both your timeline and risk tolerance. If you need the money for retirement, college expense or other need in the next couple of years, be careful. If you don’t need the money for many years, do not be too concerned about the current news.

Your financial plan must be balanced and consider taxes, health care costs and risk. Be smart. Do not let one of the most powerful human emotions – greed – destroy your financial plans.

Gary Boatman is a Monessen-based certified financial planner and author of “Your Financial Compass: Safe passage through the turbulent waters of taxes, income planning and market volatility.”

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