Broker Check

Worried That The U.S. Stock Market Might Go Down?

July 2014

The U.S. stock market has had a nice run-up since the recession of 2008. I frequently get asked if it's time for another large downturn. While nobody can know what the stock market will do because there are too many uncertain events that could occur on any given day, I thought it would be pertinent to review some key points about our approach to investing.

As a reminder, the two indexes that we most commonly hear about in the news are the Dow Jones Industrial Average Index (“Dow”) and S&P 500 (1). The Dow consists of 30 of the largest U.S. stocks and the S&P 500 consists of 500 of the largest U.S. stock. However, there are actually roughly 5,000 U.S. stocks listed on the various stock exchanges. Adding in international, fixed income, commodities, and many other types of asset classes unrelated to the stock market, the Dow and S&P represent a small portion of available investments.

The following table shows the July 1, 2014 and long-term allocation for two of the Frontier Asset Management strategies that I use for many of my clients.(2) The table is for illustration purposes only and shows just two of Frontier’s various strategies. This is not a recommendation that one of these two strategies necessarily fit for your situation.(3) The circled numbers show the percentages Frontier invests in U.S. large stocks. As indicated, the current investment in U.S. stocks is extremely low compared to their long-term allocation. This doesn’t necessarily mean that Frontier is predicting a downturn in the U.S. stock market or that the other asset groups, such as international stocks, real estate, etc., won’t go down if the U.S. stock market does. This is simply showing that Frontier currently has the portfolios exposed to other areas outside the U.S. stock market. Part of Frontier’s approach is based on finding opportunities for growth relative to current prices and risk levels.

This hypothetical example is provided for illustrative purposes only and does not represent the performance of any specific investment. Results may vary with each use and over time. Recommendations will be made based on a client’s personal financial profile, including objectives, risk tolerance and time horizon.

As with Frontier, Sherpa Financial Advisors also believes it is important to diversify your investments. In addition to diversifying within the stock market (i.e. stocks or mutual funds), I utilize other investments outside of the stock market such as Private Debt, Real Estate (e.g. REITs, land development, etc) and commodities to mention a few. Thus, I’m also including below the email that I sent out last year that is still relevant today and discusses this strategy in more detail.

Please call me if you have any questions about the performance of your investments, how your portfolio is constructed or if you’d like to discuss using Frontier Asset Management for a portion of your investments. Similarly, please forward this email to anybody that would enjoy reading it or might benefit by speaking with me about their financial questions or goals.


  1. Indexes are unmanaged and do not reflect the deduction of fees and expenses. Investors are not able to invest directly into any index. Past performance is no guarantee of future results. Please note that individual situations can vary. Therefore, the information presented here should only be relied upon when coordinated with individual professional advice.
  2. The Strategic Financial Alliance, Inc. (SFA), nor Sherpa Advisors are affiliated with Frontier Asset Management.
  3. No assurance is made that investment objectives will be achieved.
  4. Performance is historical, and does not guarantee future results.