Clients ‘Obsessed’ With Possibility of a Downturn, Wealth Manager Says

This makes it easy to believe that a drawdown is likely inevitable, especially since the last drawdown of more than 5% occurred on June 27, 2016. According to Droz, this is the longest duration without such a drop in 20 years.

"We're in an extraordinarily long period without a drawdown," Droz said.

Based on these numbers, Droz says it's impossible to think that a drop in the market is anything but imminent. But that doesn't necessarily mean investors should feel uneasy about it.

"I just have to calm my clients down a little bit and say, 'If the market doesn't draw down, that's when you worry. Because that's a natural evolution in the market,'" Droz said. "It creates opportunities. It creates time for the market to then move forward later."

As an investor, a downturn shouldn't change their behavior. Droz reminds his clients that the likelihood of a drawdown should not alter their basic investment approach or asset allocation. 

"Unless I had a client that had a huge liquidity event, I wouldn't let it change any part of the investment strategy once we set up an allocation that fits them," he said. "The key to my job is making sure that I understand who they are as investors."

Provided clients have crafted a diversified investment strategy that takes into account their personal objectives, goals and risk tolerance, a downturn shouldn't change their behavior at all, Droz says.

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