[1]DALLAS (BP)–Market analysts and pundits as well as average investors expressed a measure of excitement and skepticism as the Dow Jones Industrial Average closed above the 10,000 mark Wednesday (Oct. 14) for the first time since Oct. 3, 2008.
“We think everyone is expressing relief as the markets continue an upward trend,” said O.S. Hawkins, president of GuideStone Financial Resources of the Southern Baptist Convention. “While we do not know when they’ll regain all of the value lost since October 2007,” when the market rose above 14,000, “we know that markets are cyclical, and that if history is any guide, they will eventually return to pre-recession levels.”
American and world stock markets have witnessed a turbulent 18 months, losing nearly half their value between October 2007 and March 2009. Markets have significantly rebounded since throughout the summer and fall of 2009.
The Dow Jones Industrial Average slid below 10,000 in October of last year, before bottoming above 6,600 in March 2009.
Skepticism has been voiced by some that the recovery will be short-lived. Many pundits have reduced the question of the economy’s recovery to a series of letters to describe the “shape” of the recovery. A “V-shaped” recovery would include a deep drop, followed by a steep climb. A “U-shaped” recovery would be a steady drop, followed by a slow climb. And a “W-shaped” recovery would have a drop, followed by a steep climb, followed by another drop and then growth. The “W-shaped” recovery is sometimes referred to as a “double-dip.”
Said Hawkins, “While guessing the market’s direction, or the shape of its recovery, is the meat and potatoes of cable news and finance channels, long-term investors — as we encourage our retirement investors to be — should instead focus on long-term investing principles.”
[2]Those principles include making regular contributions to one’s retirement account and making adequate contributions in an appropriate asset allocation based on one’s risk tolerance and time horizon. GuideStone offers helpful calculators on its MyGuideStone online service (www.MyGuideStone.org) to help its participants gauge their retirement investments and determine if they are on track with their retirement investments.
“Many investors who fled the equity markets near the bottom in March of this year have missed the growth in the market since then,” Hawkins said. “This is commonly referred to as ‘locking in your losses,’ and is something less likely to occur to those who don’t let short-term market swings impact their decision-making.”
One word of caution: Changes in the market may have caused a participant’s selected asset allocation to change. It is important to consider reallocating one’s account periodically to ensure that it remains properly allocated. One approach to maintaining an age-appropriate asset allocation is investing in the GuideStone MyDestination Funds, five date target funds designed to adjust their ratio of equity investments and fixed-income investments as a participant moves to and through retirement. For more information about GuideStone’s MyDestination Funds, participants may talk to a customer relations specialist by calling toll-free 1-888-98GUIDE (1-888-984-8433).
“Whether the stock market continues on its upward climb, or if it meanders near 10,000 for weeks or months, or if it drops again, it’s important to remember that while historic trends are no guarantee of future results, the market has rewarded those investors who develop a plan and stick to it,” Hawkins said.
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Roy Hayhurst is senior marketing communications editor at GuideStone Financial Resources of the Southern Baptist Convention.