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Public Psychology, the Markets, and Last Friday

Public Psychology, the Markets, and Last Friday

| November 26, 2021
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The market (Dow 30) dropped about 900 points this past Friday (Nov. 26th, 2021).


Yet there was negligible change in our economy from the business day before. 


What made the market drop like that? In all likelihood, it was the news that there was a new Covid variant discovered in South Africa. People are afraid of travel bans, people are afraid of lockdowns, and people are scarred from everything that's happened over the last two years.


And while these fears can certainly turn into a self fulfilling prophecy, it's interesting, and important to note that the market dropped 900 points without anything economic happening. No rise in interest rates, no bubble bursting... nothing. It's all an emotional reaction. Usually when this happens, things tend to bounce right back, so we'll see. If there's bad news followed by bad news, compounded by more bad news, the emotions and the markets don't get a chance to find a foundation or something solid to spring back on, and it can build on itself. But in literal terms, nothing economic happened that would justify a 900 point drop, and that usually means a temporary reaction.


Two important points...


1 - Financial Concepts Unlimited, LLC (FCU) is monitoring this. We were already in the mode of debating whether or not to change or adjust our portfolio allocations due to potential market conditions. This just makes things feel more immediate. Having said that, it also doesn't mean we're going to determine we need to make those moves. Hence the debate. The portfolio allocations, as they stand, have been fantastic, and I'm not at all convinced they aren't exactly what they need to be as they are. But it's more about what I think of the near term future of the markets, and that relation to the current allocations, so we're monitoring how things are developing.


2 - If you're a client of FCU, than more than likely, your portfolio matches what you're comfortable with, and while no one ever likes to see values go down, you'll probably be able to sleep at night with whatever volatility you're experiencing. If you're not a client of FCU, and you're feeling uncomfortable with your current or potential volatility and/or risk in your portfolio, then that's something you might want to pay attention to or possibly adjust. If the embedded risk in your portfolio is appropriate for you, than except for extreme situations, you shouldn't really feel that discomfort. 


If you have any questions or concerns, always feel free to contact Financial Concepts Unlimited, LLC via phone or email.

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