Column: How to React in Fickle Economic Weather

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By Daniel M. FitzPatrick
Sentinel Contributor

It’s hard to believe that three years have gone by since Webster Bank and Webster Private Bank cut the ribbon and opened the doors on its Mason Street office in Greenwich. It was a particularly frigid day! Since then, we’ve experienced some real volatility in both weather and markets.

On the weather front, we saw record winter snowstorms and then, this past holiday season, 70-degree days. The economy warmed up somewhat over the past three years, but lately, it’s been quite unsettled too.

The market has had a rocky start in 2016, similar to the plunges in late August. For investors, the key is how best to react. Worrying is not a strategy; we believe instead that this is a time to stay focused on long-term goals—and communicate, communicate, communicate.

All successful relationships are based on trust and good communication. In volatile times with rollercoaster markets it is important to strike the right balance between over- and under-communicating. Most investors want to know that their wealth advisor is monitoring the markets and actively managing their portfolio with their goals and best interests in mind. Then, reaching out as and when necessary to share information they need to know. Those relationships generate the greatest return of all: peace of mind.

We’ve been on the record since October that continued volatility in the short-term is to be expected. There clearly is market uncertainty and concern due to slower global growth (particularly in China), lower oil prices impacting the overall energy sector, and North Korea’s testing of another nuclear bomb, raising geo-political concerns. We are closely monitoring these and other similar events and trends and their impact on global markets. Many investors discussed risk tolerance with their advisors in times of market stability or growth—for example, the last seven-plus years of the secular bull market—and those risk appetite assumptions are now being tested in a very uncomfortable way. “Wealth preservation in times of market volatility” is the new mantra for many of our clients.

We are now in a bear market. All the indications are there. The technical experts may argue that a correction is a 10-percent decline from a recent high, and that a bear market starts when the correction reaches at least minus 20 percent. But from a global perspective, we’re already there. The energy and materials sectors of the S&P 500, and the emerging markets, are all off previous highs by more than 20 percent.

So what is an investor to do? Don’t panic, but prepare for the future. Focus on long-term goals and objectives and let your advisor help you with risk tolerance and asset allocation decisions. Keep retirement, income, and legacy planning in mind. And keep those lines of communication open.

It’s essential to have a strong relationship with your wealth or financial advisor.  Experience shows that as most people become more successful, their needs become more complicated and the opportunities available to them expand dramatically. And the stakes tend only to increase in times of financial uncertainty. Questions your financial advisor should be prepared to address include: 

• How can what happens a world away in China or Russia affect the American markets so directly?

• One would think lower gas prices would be cause for celebration in this country; why might it not be the best thing for the market or my investments?

• How does the market volatility affect my 401K? How should I respond?

• When will there be another rate hike? What are the likely effects on my life, my account and my ability to achieve my financial goals?

Having an objective, holistic financial advisor who understands and has access to the products and services relevant to addressing your needs, is crucial—she or he can be “the steady hand at the wheel,” helping you navigate these financially choppy waters.

Webster has been navigating all kinds of waters—in good times and in bad—for 80 years.  Founded during the Great Depression with the simple objective of helping people buy and build their homes, Webster is now a leading regional bank for high net worth individuals, businesses, and consumers in the Northeast.

Daniel M. FitzPatrick is executive vice president, head of private banking, of Webster Financial Corporation and Webster Bank. He joined Webster in October 2012. Prior to this, Dan was regional managing director for the BNY Mellon Wealth Management business in Fairfield and Westchester counties.

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