The Federal government is again on the brink of another self-imposed “crisis” brought on by political dysfunction. The impending Federal government shutdown is the result of Washington being unable to govern in an effective manner.
It is not our role to point fingers and assess blame. As we often say, we focus on things which we can control. We cannot control or affect Washington (thankfully!).
What are the implications of the Federal shutdown and how should investors react?
We do not believe that investors can accurately time the market on a day to day basis. We focus on the long term. As the Federal shutdown continues, it is possible or likely that the stock market may decline. When the matter is resolved, it is likely that the market will rebound. We do not advise selling investments with the intent to repurchase them when you anticipate that the Federal shutdown will be resolved. You have to be right twice; timing when to sell and when to buy. Also, you have to know the information before others do, as the markets react immediately.
The lesson from similar government situations in recent years is that patience is generally the best strategy. While it may not feel good during a crisis, you should recognize that “doing nothing” is an important decision. While others may react and try to trade on the daily volatility of the markets, most will not do it successfully. You will be more successful over the long term by adhering to your investment plan.
Do you have an investment plan? Have you reviewed it recently? Have you tracked your investment performance against appropriate benchmarks? If not, maybe the lack of planning in Washington is a good reminder that you should have a well developed investment plan. We can’t help Washington, but we can help you.