Mood Swings and Investing Decisions

What You Need to Know

Clients were starting to relax.
Now, a new market slide is worrying them.
A solid retirement plan should be designed to last through bad market weeks as well as good market weeks.

People have mood swings and often make decisions based on their current feelings.

Following one’s feelings instead of using a planned system can lead to disaster when managing the assets inside a variable annuity or variable life policy, or any aspects of retirement planning.

Understanding that a mood swing can overturn solid decision-making can help us deal with our income planning clients and prospects.

A person may recognize something that has triggered a shift in their mood, such as a stressful event at work. But it’s also not uncommon for mood swings to occur without an obvious cause. People may even experience changes in their mood if they have an underlying mental health issue.

Investor Sentiment

Stocks fell sharply earlier in the year. Investors preferred more defensive stocks — in utilities, health care companies and food companies.

Then, just a few weeks ago, technology companies like Apple, Amazon and Tesla were benefiting from a strong market rally. The stocks of consumer discretionary companies, including Nike, Starbucks and McDonald’s, were rebounding, too.

Inflation data and a strong jobs report suggested that that the economy wasn’t slowing as sharply as many feared.

Now, the market is falling again, because of fears about inflation and new Federal Reserve Board efforts to use rate hikes to fight inflation.

Rising rates can slow consumer purchases and hurt stock prices.