Navigating Storms: An Investment Advisor's Encounter with Hurricane Michael
As an Investment Advisor, located in Bloomington/Normal IL, the biggest danger I face on a daily basis is a paper cut. So, I felt safe when the news alert flashed this ominous warning, “Leave town! You can always come back, but you’ll be alive.” It was hurricane Florence and I felt comfortable his sage advice didn’t apply to me. Little did I know then, I WOULD in fact be in the direct path of a hurricane of epic proportions, just weeks later!
Vacation Turns Into Survival Watch
When Hurricane Michael made landfall on Florida’s Panhandle on October 10th, 2018, it was the third-most intense Atlantic hurricane to hit the U.S. in all of recorded history. Of course, I didn’t foresee this on the first morning of our family vacation in Panama City Beach, FL on October 7th! But around noon that day, the first warning signs began appearing. The weather channel reported a possible Category 1 hurricane headed straight for us. My husband said it would probably be just a storm with some wind and rain; nothing to get worried about.
Over the next twenty-four hours, we followed the news as the magnitude and danger grew. It became obvious a historical Category 4 or greater hurricane would directly hit us if we stayed. Two days before the hurricane, we rushed to beat the mass evacuation out of the city, as the ocean grew more violent out our windows.
Financial Forebodings Amid Natural Disasters
We witnessed the hurricane’s destruction on the news, grateful we had sought safety at the ‘happiest place on earth’. While watching reports of the widespread damage, I saw other news regarding the financial markets, with the Dow Jones plunging 1,377 points over the two day period! A 5% drop by itself isn’t a cause for panic, but I did wonder if that was a warning sign of a different kind of storm that investors may soon be facing.
The Invisible Storm: Navigating Market Drops
With a hurricane, you have plenty of warning to get out safely. But when the market drops, it often comes like a tornado with little or no time to avoid the path of danger. The best course of action is to plan in advance how to shelter from such storms. The same goes for investments. When I prepare investment plans, that’s the exact reason I rely so heavily on various risk analysis methods. There should be no surprises in losses from improperly allocated investments.
Gamble or Guard: The Risk of Timing the Market
But, for those prone to speculation, or trying to ‘time the market’, a 5% drop could be seen as an imminent more significant market drop, or even a recession. Yet, it wasn't until February of 2020 that a rapid market decline began, as a result of the Covid-19 epidemic. While we now know the recovery came quickly and the markets soon reached new highs, there was a long period of volatility.
Could we have predicted the up and down market we've seen since then? Who can predict what will happen next? Are there currently warning signs we should be looking for?
Building a Foundation That Withstands All Storms
Look, I don’t know the future any better than the other so-called ‘experts’. What we all know is the stock market goes up and it goes down in cycles. Just like storms come and go. My advice is to be prepared before the storms come, no matter when they come or how bad they might end up being. The best course of action is to have a tested plan that’s built to weather whatever storm may come.
So, how do you prepare in advance against market-based threats to your investment portfolio? If you’re concerned about this, it may be a sign you are either facing more risk than you are comfortable with, or you may not know exactly how much risk exposure you currently have! New technology in investment advisor tools may lead to a more appropriate allocation of investments that may better weather market downturns. Other times, with a longer investment time horizon, the analysis may reveal pursuing higher long-term gains might make more sense. It comes down to building a financial foundation that is computer stress tested against various scenarios to predict desired outcomes with a greater than 90% accuracy.
Back to Sunnier Days, Armed with Lessons
I learned the importance of preparation and a philosophy of preparing a foundation that’s built to stand up to extreme weather challenges. After the storm had passed we heard the news of the devastation and huge swaths of structures reduced to rubble. Yet, we found out our beach condo we had left was still standing strong. It was definitely built to weather the storm and just as the builders had prepared for the worst, we were smart enough to heed the warning signs and get out. And just like the official warned to get out and come back alive, we can’t wait to return to the beautiful beaches of Panama City Beach and enjoy sunnier days!
Krista McBeath is an Investment Advisor, Chartered Financial Consultant, a Licensed Insurance Advisor, a Fiduciary, and an experienced tax advisor who specializes in financial planning, investments, and insurance. She utilizes advanced tools for in-depth calculations that analyze tax and retirement scenarios to help her clients avoid a future tax time-bomb. Whether this means enjoying more of your hard-earned money in retirement or passing along assets to loved ones with less tax burden, planning makes the difference.
Her Amazon best-selling book, The Generational Wealth System outlines a holistic approach to preserving lifestyle, wealth and legacy.