Stock market signs and predictions: déjà vu all over again?
May 13, 2013 by Jason Kestler
Short version
This may be the best window of opportunity you have ever had to sell your clients a fixed index annuity (FIA).
Long version:
If you are still reading, you are probably saying to yourself, “OK, tell me why.” Whether you are an insurance agent, a registered rep or a financial advisor, the vast majority of your clients are sheep. I don’t mean that disparagingly, but Mom and Pop are the world’s worst investors.
According to the Investment Company Institute, the trade body of the mutual fund industry, U.S. investors flooded the market with stocks in the fall of 2008 and the winter of 2009. From September, 2008 through March, 2009, ordinary U.S. investors dumped $114 billion worth of stock funds. They sold at absolutely the worst time. Now, times have changed…
If they look at the S&P Index from January 2000 through April 11, 2013, what do Mom and Pop see? They see the market at an all-time high and they want to get on the gravy train. When should they have boarded that train? In mid-2009, when the “sheep” were leaving the market.
You may be aware that we run a very large securities office. Over the last month we have continued to break sales records almost daily. Don’t get me wrong, we appreciate the business, but clients (or advisors?) who wouldn’t consider equities in 2009 are now jumping into the market with both feet. Should that be a warning?
Remember the real estate bubble? People were quitting their jobs so they could buy real estate and flip the house in a matter of months for a profit. Or, remember when everyone thought they wanted to be a day-trader? The point is that when the unsophisticated investor starts flooding into the market, the smart investor sees it as a time to exit.
According to Warren Buffet, “There is no great mystery to the stock market. The longer I follow it, the less complicated it actually becomes. Buy stocks when they are cheap and everyone is afraid to own them. Don’t buy stocks when they are expensive and everyone is afraid of getting ‘left behind.’ In other words, be fearful when others are greedy, and greedy when others are fearful.” Pretty sage advice from someone who obviously knows what he’s doing. Take another look at the graph above and ask yourself, “It’s January 2008, my clients just had a six year upward run in the market. Knowing what I know now, would I take some chips off the table?”
We’ve had a similar run since early 2009. So, think of your clients in the retirement “red zone.” Does it make sense to call them and discuss taking some chips off the table? Try asking them this question: “What would happen to your retirement plans if we had another market correction like we did in 2008?”
As former Yankees catcher, Yogi Berra said, “It’s déjà vu all over again.”
By using an index annuity, you can provide a principal guarantee with uncapped upside potential.
Yogi Berra, the great financial planner. Wonders never cease.
