There’s always some catastrophe looming on the horizon. Most of the time you don’t even need to look very hard to find it. If you follow the financial media, sometimes it feels like disasters are all the horizon holds.
This time it’s the upcoming Italian referendum in early December that could potentially threaten the expected economic reforms there.
If these economic reforms don’t happen, it raises the specter of an economic crisis in Italy and the EU generally, as well as a possible Italian default. We’ve dealt with this before with the Greek economic “issues,” but Italy is a much bigger economic player than Greece.
Let’s get some context. We’re pretty much constantly seeing “crises” in the markets. Adding this onto the presidential election, six events of the past eighteen months should have devastated the markets:
- July 2015 – The Greek debt referendum and Chinese market volatility
- August 2015 – Black Monday and the surrounding volatility
- January 2016 – Turmoil in the Chinese Markets
- June 2016 – Brexit
- November 2016 – Donald Trump winning the presidential election
- December 2016(?) – The Italian referendum
That’s an average of one disaster per quarter. In other words, looming catastrophe has become old hat.
So the market must be more volatile nowadays than ever before, right? No. The market is not any more volatile than it has been in the past.
When building your portfolio, make sure it’s ready for constant crisis mode. These “crises” are just part of life in the markets. A well-diversified portfolio will help you remain disciplined through all of the noise.
Because staying disciplined is what investing is all about.
There’s always something that could cause the markets to collapse. Sometimes it happens, but most of the time it doesn’t. Unfortunately, it’s impossible to know the difference beforehand. You need to stay focused on the long-term upward trend.
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