Increased market volatility, which has commanded increased headlines in the days leading up to the November mid-term elections, has caught many by surprise, but GuideStone Chief Strategic Investment Officer David S. Spika said that stock market volatility is a very common and normal occurrence.
The stock market — as measured by the S&P® 500 Index, experiences price swings of 1 percent or more some 62 times a year. The same broad index of the stock market averages only 71 trading days between declines of 5 percent or more.
“The recent sell-off may feel unsettling to investors because they have been lulled into complacency by an historically low-volatility environment over the past couple of years,” Spika said, “but it’s actually quite normal and nothing to be concerned about at this time.”
Fears of rising interest rates and the impact that higher rates may eventually have on the economy are driving this current market volatility, Spika said.
“As the economic cycle matures — we are now in the tenth year of the current expansion — economic growth and employment gains force the Federal Reserve to raise the Fed Funds rate to prevent an outbreak of excessive inflation,” he said.
Additionally, fears about the ongoing trade negotiations with China and the outcome of the mid-term elections may have also stoked the current market volatility.
While volatility can be unnerving, the best course of action for retirement investors is to stick with their long-term asset allocation plans.
“It is impossible to time the market,” said GuideStone President O.S. Hawkins. “In fact, the market has historically rewarded those with long-term perspectives. Retirement account performance moving forward is based on results of the financial markets in the future, not in the past.
“While it’s easy to focus on the headlines and emotions brought on by the 24/7 news cycle, GuideStone® believes it is best to avoid overreacting and for investors to stick to their long-term plans.”
Spika noted that investors who believe they have too much equity (stock) exposure as a result of the strong run in the market since November 2016 may consider reallocating and balancing their portfolio. One approach GuideStone offers to that end is the MyDestination Funds® family of Target Date Funds. Retirement plan participants choose the Fund that is closest to their desired retirement date; each Fund is a “fund-of-funds” with a diversified asset allocation that becomes more conservative as the participant approaches the target date and through retirement.
Roy Hayhurst is director of denominational and public relations services for GuideStone Financial Resources of the Southern Baptist Convention®.
Director of Denominational and Public Relations Services
GuideStone Financial Resources of the Southern Baptist Convention
Roy.Hayhurst@GuideStone.org | (214) 720-2141
The MyDestination Funds® (“Funds”) attempt to achieve their objectives by investing in the GuideStone Select Funds and other investments. The Funds are managed to a retirement date (“target date”) by adjusting the percentage of fixed income securities and equity securities to become more conservative each year until reaching the retirement year and then approximately 15 years thereafter. The target date in the name of the Funds is the approximate date when an investor plans to start withdrawing money. The expense ratio for the Fund includes the expenses of the underlying Funds. The principal risks of the Funds will change depending on the asset mix of the Select Funds in which they invest. You may directly invest in the Select Funds and other investments. The Funds’ value will go up and down in response to changes in the share prices of the investments that they own. The amount invested in the Funds is not guaranteed to increase and is not guaranteed against loss, nor is the amount of the original investment guaranteed at the target date. It is possible to lose money by investing in the Funds.
You should carefully consider the investment objectives, risks, charges and expenses of GuideStone Funds® before investing. For a copy of the prospectus with this and other information about the Funds, please download a prospectus or call 1-888-98-GUIDE (1-888-984-8433). You should read the prospectus carefully before investing.
GuideStone Funds shares are distributed by Foreside Funds Distributors LLC, a registered broker-dealer and underwriter of the Funds. GuideStone Capital Management®, a controlled-affiliate of GuideStone Financial Resources®, serves as the investment adviser to GuideStone Funds.