How to Deal with Conflicting Market Sentiment

Welcome to the Paragon Podcast. Lately, it seems like the media is continually giving us conflicting market news. One week the market is on a rally that can’t be stopped and the next week it’s about to come tumbling down. In this episode Evan Shorten and Elean Mendoza discuss a few a ways for you to deal with conflicting market news and sentiment. 

Introduction: Welcome to the Paragon Financial Partners podcast, where we discuss the markets, our strategies, and how to live better today while planning for tomorrow.

Elean: Hello and welcome to the Paragon podcast. I’m Elean Mendoza and I’m here with Evan Shorten, the firm’s founder and principal.

Evan: Hello. I want to thank everyone who listens to our podcast and for tuning in. If you’re just listening for the first time, I encourage you to subscribe. You can do so via the Apple podcast app or Stitcher Radio. Lastly, if you’d like to view more of our content, please visit us at paragonfinancialpartners.com/insights.

Elean: So, every once in a while, we post about how investors can deal with negative sentiment and volatility. Being able to handle the ups and downs of the markets is important for long-term success and staying on track with your financial goals. While there hasn’t been a strong market decline in a few months, there sure is a lot of mixed sentiment going around – and it changes weekly. One week we’re reaching all-time highs and the bull market has no end in sight. While the next week it’s about the oncoming earnings recession and how everything is ready to drop 20%. One week the focus is on how rate cuts will trigger the next recession. And the next is how rate cuts are going to lift the economy. The reality is, while everyone has an opinion to bombard you with, no one really knows what’s going to happen. So, with that, let’s go over a few different ways to help you stay sane and clearheaded. Evan?

Evan: Okay, so the first thing I would say is turn off the TV or the radio, or whatever is continually bombarding you with the conflicting news. Go ahead, listen to your preferred news source, but don’t obsess. Don’t dwell on what every news source is saying. It’s important to focus on the forest and not the trees. As the market goes up and down, it’s easy to become focused on day-to-day returns, but maybe try and keep your eyes on long-term goals and your overall portfolio. If you still have years to invest, don’t overestimate the effect of short-term fluctuations. Along with staying focused on your long-term goals, have a plan in place. While it’s important to be diversified and to balance your risk level in advance, diversification doesn’t guarantee against losses. Making a plan that dictates how frequently you’re going to rebalance your portfolio, when you’re going to take profits, or when you are going to harvest losses is going to help you navigate uncertain times.

Elean: Also, along with having a plan in place, you should know what you own and why you own it.

Evan: Yes, you should periodically evaluate why you originally bought a specific investment and if that reasoning is still valid. This is going to help you navigate turbulent times. For example, seeing a position you truly believe in go down in value shouldn’t bother you too much and knowing why you hold it may prevent you from making emotions-based trading decisions. If you work with a financial advisor or someone who manages money for you, don’t hesitate to give them a call and have them review with you, your portfolio and the specific investments in it.

Elean: It’s also important to remember markets are cyclical. When we do hit choppy periods or downturns, they will eventually end; and also keep the same in mind for bull markets – they will eventually end as well.

Evan: Yes, and whether the markets are going up or down, our own worst enemy can be our own psychology. During market downturns, we get inside our own heads and want to sell out. We’re presuming the markets will continue falling and getting out is the best way to preserve assets. Conversely, when the markets are going higher, our own psychology makes us overconfident and we start believing that it will never end, ultimately leading one to possibly allocate a greater amount to specific investments nearing the top of the market. To minimize the poor decision making our own psychology can create, I recommend doing two things if possible. First, is dollar-cost average. Maintaining a schedule of when you allocate funds will help you minimize the amount of shares you buy at higher prices and maximize the amount of shares you buy at lower prices. Essentially you’re buying less expensive shares of something and more cheap shares. This highlights what I mentioned earlier about knowing and believing in the investments you own. It’s easy to dollar-cost average into a specific investment you believe in. Second, I recommend talking to someone with more experience than yourself. If you work with a financial professional, give them a call. A big part of their job is to help protect you from your emotions.

Elean: Okay, great. I think we touched on a few important points in this episode. You’re always going be bombarded with optimistic and bleak news at the same time, and it’s going to get in your head if you listen to too much of it. Don’t forget, positive news can be just as dangerous to us as negative news by creating a false sense of comfort. Hopefully, by implementing some of the things we discussed here, such as having a long-term focused plan; holding investments you truly believe in; dollar-cost averaging; and having a support person can help keep your emotions in check when you listen to the financial media or when we experience volatility in the markets.

I want thank everyone for tuning in and listening to our podcast. If you haven’t done so already, please subscribe on Apple podcast or Stitcher Radio.

Evan: Yes, thank you for tuning in. Also, if you need help navigating the financial markets both from a behavioral finance or practical standpoint, please don’t hesitate to reach out to us. Thank you.

Disclosures: Paragon Financial Partners Inc. is a registered SEC investment advisor. The broadcast is for informational purposes only and should not be considered as a solicitation or offer to purchase or sell securities. The financial strategies and guidelines discussed herein may not be appropriate for everyone as each individual circumstance is unique. Please review all tax information with your tax professional. Please review all legal information with your legal professional. We hope you enjoyed the Paragon Financial Partners podcast, and again, thank you for listening.

Author: Paragon Financial Partners

Paragon Financial Partners, Inc. is a Registered SEC Investment Advisor. The topics discussed herein are for informational purposes only and should not be considered as a solicitation or offer to purchase or sell any securities. The financial strategies and guidelines discussed herein may not be appropriate for everyone as each individual circumstance is unique. Please review all tax information with your tax professional. Please review all legal information with your legal professional. If you have any questions or would like to speak with us, please contact us by phone at (310) 557-1515 or by email at info@paragonfinancialpartners.com.

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