Times are good, folks. The stock market has been on a tear since November, at least US stocks and building on eight years of gains since the financial crisis. Interest rates remain low and there are sold signs on houses throughout our neighborhoods and new cars in the driveways. Urban areas are booming and being revived at a very fast pace. Money is available for almost anything and consumers are spending. People are employed and the unemployment rate is at the lowest level in nearly sixteen years. Did I miss anything?
The challenge during good times is to recognize that the party does not last forever. Eventually US stocks will “correct”. Eventually interest rates will cool and the housing market will settle in to something more normal. People will lose their jobs next time we enter a recession. I don’t mean to be a pessimist, but, we need to look behind our back to history. Bad things can and do happen in the US and abroad. Man has a way of defeating himself. Unfortunately, we just don’t know when and what the next cause will be?
So, the point here is remain diligent. Rebalance the portfolio that has gotten out of whack since the market has gone up – you are likely taking on more risk than you were a year ago and certainly five years ago! Don’t pile on the debt just because interest rates are low if you really can’t afford to. Make sure you have adequate cash reserves that you can fall back on if you lose your job or the economy tanks. Do these things when things are good, not when you are forced to react to some nasty event. You will be glad you did.