What Caused the Stock Market Selloff?

Plus: Model tax-efficient portfolios for Fidelity investors. [Morningstar](?utm_source=eloqua&utm_medium=email&utm_campaign=newsletter_improvingfinances&utm_content=56643&elqTrackId=630a4acf09484b4b9a4ecef4d2b808ad&elq=53da638261d84346a487b55de87d8ead&elqaid=56643&elqat=1&elqCampaignId=28869&elqak=8AF51BFEF7D93A5196F36C29E4054EE16BFF7A5E5AF1820DB477B33F1A556FED4436) [Improving Your Finances] Improving Your Finances with [Christine Benz]( [Christine Benz] As I scrolled through the headlines on my phone on Sunday night, everything pointed to a very ugly open for the markets. I fired off [this tweet]( and went to bed. Sure enough, stocks were sharply down on Monday morning, spooked by Friday’s bad jobs report and recession chatter, among other factors. I appreciated [Sarah Hansen’s distillation of what prompted the market downdraft]( as well as [Preston Caldwell’s take on whether a recession is in the offing](. (He doesn’t think so.) My own two cents is that full valuations in the market’s top stocks leave it vulnerable to any negative news that comes along, whether related to the economy, interest rates, or exogenous forces like Japanese interest rates and the yen. Because of that, I’d argue against the standard personal finance advice to do nothing when the market falls. True, you rarely want to be a seller amid pandemonium, and young people with stock-heavy portfolios should sit tight with their positioning. As my colleague Sam Lamas wrote, [being lazy is often very smart](. But inertia isn’t always the right course, and it can be reinforced when the market is scraping new highs almost every day. The result is that many older adults are hurtling toward retirement with very equity-heavy portfolios, which leaves them vulnerable to what retirement researchers call [sequence risk]( losses early in their retirements. Meanwhile, cash and bond yields are still quite attractive, even factoring in their recent declines in the expectation of Fed rate cuts. Thus, I’d argue that preretirement and early-retirement investors [should consider selling at least some of their stocks]( the extent their equity weightings exceed their targets--and shifting the proceeds into safer assets. Annuities are often touted as a way to add guaranteed lifetime income to a retirement plan, effectively replacing the pension income that most of us won’t have in retirement. But retirees don’t seem interested: Basic, low-cost annuities have meager sales, while more-complex products have seen much greater uptake. I appreciated [John Rekenthaler’s recent look]( at the status of innovations to add more guaranteed income to retirement plans. Finally, in my ongoing quest to depict just how simple it is to build a sturdy, well-diversified portfolio, I featured some of [my tax-efficient model portfolios this week—six portfolios geared toward Fidelity investors’ taxable accounts](. They’re not fancy, but they include very low-cost options in the major asset classes and are likely to limit taxable capital gains and income distributions as the years go by. With warm regards, Christine Benz [What Caused the Stock Market Selloff?]( Investors worry that a recession is back on the table. [Find Out]( Share: [facebook]( [twitter]( [linkedin]( ADVERTISEMENT [media]( [media] [Why a Recession Isn’t in the Cards ... for Now]( And what this week’s market volatility means for Fed interest-rate cuts. [Get More Details]( [A Key to Surviving the Global Market Selloff: Be Lazy]( If you feel the urge to take action during market volatility, try these approaches. [Learn More]( [Sequence of Returns: What It Means and How to Deal]( The order of when things happen can be your friend or your foe. [Avoid Losses]( [Maybe You Should Sell Some Stocks]( Not everyone should sit still despite the market's turbulence. [Read More]( [The ‘Three-Legged Stool’ of Retirement Is Missing a Leg]( Personal annuities can only get the system so far. [Read the Commentary]( [Tax-Efficient Portfolios for Fidelity Investors]( These six portfolios—three for retirees and three for retirement savers—are designed for Fidelity investors’ taxable accounts. [Gain Insights]( Get Top Stock Picks and Market Insights Every Week on The Morning Filter. Every Monday morning, Susan Dziubinski sits down with Morningstar Chief U.S. markets strategist Dave Sekera to discuss what's on his radar, new Morningstar research, and stock picks or pans for the week ahead. [Watch Now.](morningstar/streams?utm_source=eloqua&utm_medium=email&utm_campaign=newsletter_improvingfinances&utm_content=56643) Stay connected: [twitter]( [facebook]( [linkedin]( [instagram]( [YouTube]( [Apple News]( [View online]( | [See all newsletters]( | [Share your feedback]( [Unsubscribe]( from this newsletter. Or update your [email preferences](. © 2024 Morningstar, Inc. All Rights Reserved. 22 W. Washington St. Chicago, IL 60602