By Kyle Foito, Wealth Advisor

Markets tend to feel easiest when everything is going well. Portfolios grow, headlines are positive and it becomes easy to assume the financial plan is working exactly as intended. But strong markets are often the best time to step back and evaluate whether a plan can actually hold up when conditions change.

A helpful way to think about this is to prepare for a storm. When the storm is already hitting, there is only so much you can do. The real preparation happens beforehand. You check supplies, secure what you can and make sure you are ready if conditions worsen. Financial planning works the same way. The time to prepare for volatility is when markets are calm and portfolios are growing.

Markets move in cycles. Periods of strength are typically followed by periods of adjustment, and that pattern has repeated throughout market history.¹ A financial plan that only works when markets cooperate is not durable. Strong markets give investors the opportunity to review their strategy without the pressure that comes during downturns.

At the same time, strong markets can create blind spots. When things are going well, it is natural to assume they will continue that way. That mindset can lead investors to take on risks they may not fully recognize. One example is concentration risk. When a particular investment performs well, it can quietly grow into a larger share of the portfolio, increasing exposure to a single company or sector.²

Other parts of the plan can fade into the background during strong markets. Liquidity is one example. Investors may focus on returns while overlooking how quickly they could access funds if something unexpected happens.³ Maintaining liquid assets can help ensure financial obligations are covered even during volatile markets.³ Lifestyle creep can also appear over time as rising account balances encourage spending decisions that assume strong markets will continue indefinitely.⁴

That is why we stress test financial plans. Instead of assuming one outcome, we examine how the plan performs across different scenarios.⁵ What happens if markets slow down? What if income changes or a health event affects the household? Stress testing helps confirm that the plan can work in both favorable and difficult environments.⁵

Strong markets can also make it easy to postpone planning conversations. When portfolios are performing well, it may feel unnecessary to revisit key decisions. In reality, life continues to change. Careers evolve, families grow, and priorities shift. Reviewing a financial plan regularly helps ensure it reflects current circumstances rather than assumptions made years earlier.

Preparing ahead of time is always easier than reacting when conditions suddenly change. Just like preparing for a storm before it arrives, thoughtful planning during strong markets can make a meaningful difference when markets eventually turn. If you have questions about how your plan is positioned or would like to review it in more detail, reach out to your advisor.

Sources

1. Investopedia (9/11/25) - Understanding Market Cycles: Phases, Functionality, and Types
2. Investopedia (11/7/24) - Concentrated vs. Diversified Portfolios
3. FDIC (updated as of today) - Liquidity and Funds Management
4. Investopedia (9/11/25) - Understanding Lifestyle Creep: Impact on Your Finances and Solutions
5. Kiplinger (6/3/25) - Stress Test Your Retirement Plan: Because Life Happens

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