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Jerry Citarella: Summer’s here and the stats are scary

Financial Truth

Posted: June 12, 2012 2:00 a.m.
Updated: June 12, 2012 2:00 a.m.
 

Aah … summer fun. It’s the time we enjoy ourselves and relax a bit. The kids are out of school and our vacations are planned. The evenings are beautiful and the barbecue is getting used regularly. Everyone looks healthy and happy. It’s a pattern many are familiar with. We work hard and then look forward to our summer fun.

Lately, there’s also been another pattern relating to summer; however, it’s not as much fun.

It’s no secret that we’ve had volatile, and sometimes frustrating, financial markets for the past decade or more. There are always market ups and downs. They’re tracked and compared all the time. Experts track patterns and attempt to predict what might happen next or at least try to explain what just happened. There are even names for various patterns, such as the well-known “double dip” or the “cup with handle” or “continuation diamond.”

These and many more patterns have been watched, recorded and studied for years. History does seem to repeat itself, so it makes sense to try to identify what’s going to happen next through familiar patterns.

Why am I talking about patterns in a column about summer? Well, here’s the bad news. This year, summer begins on June 20. That’s only a week or so away. That date alone isn’t bad news. It’s what has happened in our stock markets during summer for the past nine of 10 years. The U.S. stock markets have had a reasonable-to-substantial (or very close to) dip in the summer for 90 percent of the past decade. Will history repeat itself again this year?

I can’t answer this question or predict the future; nobody truly can, but I can say odds are obviously pretty good for another dip. The question then becomes: How big will the dip be if there is one? The other important question is: Should you do anything based on this knowledge?

Here’s the good news. There are very good money managers and companies who are great at recognizing these types of patterns. They have the ability to adjust accordingly to what they believe will happen next.

These managers will own traditional investments, but will make changes to the portfolio mix or, in some cases, pull completely out of the markets if they deem it necessary. They’ll never be right all the time and some have been right more than others, but it sure is nice to know that at least there’s a chance you’ll be in a position to avoid a substantial downturn. One manager I’m very familiar with pulled completely out of the stock market on May 1 after being 100 percent invested in it. What a great move that was.

There are many patterns and many strategies. One that’s fairly obvious is upon us … a summer dip! I’d love to think it won’t happen this year, but with the recent uncertainty — both in the U.S. and around the world — I think odds are high we could see another dip. I agree, it’s getting a bit frustrating, but we can’t change it so we need to learn how to either accept or deal with it. You need a plan.

In today’s markets, “sitting tight” may not be the best plan. Buying and holding a diversified portfolio of investments just doesn’t seem to be the answer lately. Many basic strategies that have worked for so many years aren’t achieving the same levels of success.

More than ever, qualified professional help is necessary. It doesn’t necessarily mean a professional will tell you to run and hide this summer, but it’s important, at least, to recognize the pattern and have some sort of plan. Plan, plan, plan, plan, plan! Success rarely happens accidentally. Knowledge is power and planning is critical.

Jerry Citarella is the owner of Infinity Wealth Management www.InfinityGoals.com. 23734 Valencia Blvd., Suite 301, Valencia, (661) 255-9555, ext. 11.  He is also the author of The Truth Helps Series of financial planning books. Mr. Citarella’s column reflects his own views and not necessarily those of The Signal. Submit questions to: jcitarella@nextfinancial.com.  Securities and investment advisory services offered through NEXT Financial Group Inc. Member FINRA/SIPC.  Infinity Wealth Management is not an affiliate of NEXT Financial Group Inc.

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