There is wide-spread agreement now among financial advisers that we will see an increase in volatility in the U.S. stock market followed by an increase in global market volatility. Notwithstanding the fact that widespread agreement does not make it more likely to happen, it makes sense to consider the impact of the expected consequences. When the market is at an all-time high point there is significant risk that increased volatility will be viewed as a “crash” by the investing public. So how should advisors help their clients prepare for increased volatility?
I can only say that from my own experience, an unstable investment market leads to lack of confidence and more difficulty making commitments and reaching decisions in a wide range of business and personal financial planning. Those with less debt tend to be less affected.The impact of an unstable investment market can last for years after the regain stability at a lower market value. The spill-over effects extend to increased unemployment and marital stress.
While there is no point to yelling “the sky is falling”, advisors who encourage a conservative financial approach may find themselves working with clients who are less stress next year.