Time to Rebalance? | The Investors Edge

By John Stewart, chief investment officer at Farmers Trust Co.

Week in Review:  Powell Punishes Stocks

CANFIELD, Ohio — If you’re an avid follower of the financial markets, you likely know by now that the Fed chairman, Jerome Powell, has as much or more power to influence markets than anyone on the planet.

The Fed has collectively been telling markets for months now that they are committed to fighting inflation, and are willing to do almost whatever takes to bring price pressures down – even if that means tipping the economy into a recession.

For some reason, the stock market has reluctant to believe this message recently, rallying more than 10% off its June lows, thinking the Fed will likely come to its rescue if things get too much worse.

Last Friday, Mr. Powell decided to make it simple in an 8 minute speech at the Fed’s Jackson Hole summer conference – and the markets received the message loud and clear.

The Dow fell more than 1,000 points on Friday alone, and the S&P 500 is now down roughly 8 percent in the past two weeks.

We’ve been warning that more volatility was likely despite the rally in stocks from mid-June through mid-August. It appears we may still not be out of the woods just yet.

Featured Insight:  Time to Rebalance?

School is back in session, fall sports are kicking off, and Halloween will be here before we know it. With that said, have you looked at your asset allocation recently?

You may or may not have an investment objective set for your investment portfolio. For those who don’t have an objective set in place, a common asset allocation may include a combination of equities, fixed income, alternative investments, and cash; set at targeted percentages. For example, 50% stocks and 50% bonds.

Given all the recent volatility in markets, the value of each asset class may have earned a different return that impacted the weightings of your overall portfolio. As a result, your asset allocation may look different than it did at the beginning of the year.

Rebalancing your portfolio will reduce the value of the best performing assets in your portfolio while adding to some of the underperforming investments. Think of it as a mechanism to systematically buy low and sell high – that’s the ultimate objective, right?

Rebalancing can be done periodically, say once per calendar quarter – or it can be done anytime your asset allocations veer too far away from their target levels. Just be sure to keep a close eye on your portfolio so that you’ll know when it’s time to act.

Looking Ahead: The Cruelest Months

Apple is holding a launch event at its headquarters in Cupertino, California, on Sept. 7th. The company is expected to announce new iPhone models, as it has every September since 2012.

Expect Apple to show four new iPhones and an updated Apple Watch next week, but be on the lookout for a possible surprise announcement as well.

Some people are expecting the possibility that Apple announces a deal with the NFL and DirectTV to take over the Sunday NFL Ticket platform that allows subscribers to watch out of market football games.

The company is trying to attract new Apple+ subscribers, and this could be an attractive way to accomplish that. Either way, we may see some movement in the stock next week based on investors’ reaction to the event.

Copyright 2024 The Business Journal, Youngstown, Ohio.