Volatility Advisers’ Biggest Concern in First Quarter

Portfolio management was the second big focus, Fidelity found.

In the first quarter of the year, financial advisers were foremost concerned with market volatility, with 30% citing this as a concern, according to the latest Fidelity Investment Pulse study. Their second area of focus was portfolio management. Their third-biggest area for unease was developments in the political and regulatory landscape.

On the other hand, concerns about interest rates fell from the second biggest area of focus in the fourth quarter of 2015 to the seventh in Q1 2016. This was a dramatic shift, Fidelity Institutional Asset Management said, as interest rates had consistently been one of the top five topics for advisers every quarter for more than two years.

“There is no question that the market had a volatile start to 2016, so it’s no surprise that volatility was a top concern for advisers in the first quarter, particularly in January,” says Scott Couto, president of Fidelity Institutional Asset Management. “Volatility can be uncomfortable, but advisers shouldn’t allow short-term events to dictate changes to long-term strategy. It is important for advisers to focus on what they can control. This starts by helping clients look at longer-term horizons, and by having a plan to invest through market fluctuations.”

Fidelity pointed out that in the wake of the most recent recession, starting in March 2009, the U.S. stock market generated a five-year return of 178%. Similarly, following a dramatic period of Fed tightening, staring in December 1994, the market generated a five-year return of 251%.

The analysis echoes advice that Fidelity issued in early February, when the investment firm said that moving in and out of the market can hurt an investor’s long-term retirement savings. If an investor with a $10,000 portfolio in 2008 moved all of their assets out of equities, by 2015, the portfolio would have grown 74% to $17,360. However,  if the investor kept a portion of the portfolio in equities, the portfolio could have grown 150% to $24,800.