Hello, Happy New Year.  My name is Chad Taylor, Managing Partner with MDT Financial Advisors here in Houston TX

If you've been keeping up with Wells Fargo Advisors Investment Institute's weekly market commentary, you're likely aware of their ongoing cautionary stance. They continue to express concerns about the potential for a recession in 2024, anticipating increased market volatility if such an economic downturn occurs. The question then becomes, what should you do if their predictions come to fruition? It's worth noting that while numerous 2023 forecasts, including our own research, suggested a recession, it has yet to materialize, leaving the possibility open.

So, how should you navigate this uncertainty? Should you sell your stocks or bonds, or should you maintain the status quo? The answer is nuanced and contingent on various factors.

Let's start with uninvested funds—money sitting in your checking or savings account, CDs, or newly acquired through an inheritance, bonus, or business sale. In these cases, exercising caution is advisable. Consider employing a dollar-cost averaging strategy over a specific time period. If you are pretty nervous, perhaps invest a portion each month over the next 12 months; if you're less apprehensive, a six-month timeline might suffice. The key is to take your time when integrating these funds into your portfolio.

If your portfolio is already fully invested, the decision to alter your strategy depends on your comfort level. It's essential to remember that even the most informed strategists struggle to predict market movements over a 12-month period. If your financial goals don't require immediate access to funds for significant expenses like travel or home renovations, it might be prudent to focus on a longer-term horizon, say 3-5 years. Historical data suggests that a 60/40 stocks-to-bonds portfolio has over something like 93% chance of being higher in value three years from now, providing a rationale for maintaining your current allocation.

However, if market jitters are setting in, making minor adjustments to your portfolio might provide a sense of control. For instance, if your portfolio is currently 60/40, you might consider a slightly more conservative allocation, such as 50/50 or 40/60. While attempting to time the markets is generally discouraged, historical evidence indicates that making modest changes during volatile periods can offer reassurance to some investors.

Personal factors play a crucial role in these decisions. Reflect on your past reactions to market volatility and assess how you're handling the current uncertainties. Are downturns more challenging to navigate now than in the past? Everyone's circumstances and risk tolerances differ, making it essential to tailor your approach based on your unique financial situation and emotional response to market conditions.

Additionally, it's crucial to emphasize that modifying your portfolio mix often necessitates a revisit to your overall investment plan. Changes in asset allocation can have a profound impact on your financial strategy and its alignment with your goals. Consider reassessing your investment plan to determine whether the adjustments enhance or diminish the probability of achieving success.

Take a closer look at the updated probability of success numbers following the portfolio changes. Are they more favorable, indicating an improved likelihood of meeting your financial objectives, or do they suggest increased risk and a potentially lower chance of success? Understanding how alterations to your portfolio composition influence these probabilities is integral to making informed decisions.

In conclusion, the financial landscape is complex, and the future is uncertain. Let's engage in a discussion to explore your specific circumstances, preferences, and concerns. Through dialogue, we can work towards a decision, with the understanding that adjustments can be made as the situation evolves.

Thank you and have a great day.