Before talking about the markets, our hearts go out to the people of Japan. We can not fathom what they are going through. Even though Japan’s infrastructure was designed to withstand earthquakes, the magnitude of this quake and subsequent tsunami was an incredible reminder that no matter how well humans try to contain our environment, nature can still cause devastating harm.
We, like the rest of the world, are watching with interest to see what happens with the nuclear reactors in Japan. No one knows the full extent of the damage yet, and to make investment decisions based on media reports would not be appropriate. Keep in mind, the United States lost a major city (New Orleans) when Katrina hit and it was not the end of the world. The Japanese are very strong people and we have no doubt that they will recover (and learn) from this event. When and how fast Japan will recover is a question that only time will tell. We are looking at investments that could benefit from the recovery, but we want to be prudent about the timing of any such investments.
During uncertain times like this, it is good to remember some sage investment advice:
1) There will be events (Hurricane Katrina, 911, Japan’s earthquake, etc.) that occur in the future that will rattle the markets. Expect them to occur and don’t manage your financial future in anticipation of those events.
2) The stock market always goes down faster than it goes up. Expect more volatility on the downside and less on the upside.
3) As we mentioned earlier this year, the stock market was overbought in the short-term. Overbought conditions can last for a while, but they will be eliminated in one of two ways: the stock market moves sideways for a period of time or the market corrects. The Japanese earthquake was just the catalyst to alleviate this over-bought condition.
4) Don’t let your emotions change your long term goals or investment strategies. We have seen time and again investors both being euphoric (Tech boom of 1990’s) and fearful (March of 2009). Poor investment decisions during these times can ruin one’s financial future.
As always, we are here for you if you have any questions or concerns. Please don’t hesitate to call if you would like to discuss these events or your portfolio.
Your THOR Team