Don't merely stay the course; navigate it.

by Linda Postorivo

The Wall Street Journal released its Survey of Economists on September 19th, and it revealed that one in three expect the US economy to slip back into recession within the next twelve months. I take that to mean that two-thirds, or the majority of them, do not expect this will occur.

With this as my backdrop, let us note that the stock market generally rises in a pre-election year due to a potential shift of power. In fact, the stock market has risen every third year of a Presidential election cycle since 1939. It is worrisome, however, that this year we are still 'under water.' As of September 22nd, the S&P is -3.3% year-to-date. But even with the wild swings we've witnessed over the last several months, it's not inconceivable that we will see solid positive performance by year-end.

The Fed is doing its part by keeping interest rates low. Corporations are flush with cash. Blue chip stocks are yielding more than 10-year Treasury bonds.

So what is an investor to do? For years investment advisors have preached that "staying the course" was the best alternative in a volatile climate. But what does that really mean? Unless something significant in your life has changed, 'staying the course' means:

Don't panic and sell out at the bottom to realize a loss.

Do use this time as an opportunity to rebalance your portfolio (sell high/buy low).

Do look for inefficiencies in the marketplace and exploit them. Volatility brings opportunity; take advantage of those windows and act.

Do implement small tactical tilts to your portfolio when and where they make sense.

Staying the course is not as important as navigating it.