Last week the S&P 500 dropped 11% in 5 days. A decline this big and fast has only happened two other times in the history of the index. This week the (stock and bond) market has seen large daily moves both up and down as well. Volatility is not fun, but it is normal and it is dominating market headlines at the moment. Many people will be receiving their monthly statements soon (if you haven’t already) and last week’s market decline will be reflected on that statement. For some perspective, below is a note that we sent to clients in December of 2018 when the S&P 500 was nearing the end of a 19%+ decline. While no market decline ever looks the same, and the headlines always read a little different we are optimistic as the current underlying economic fundamentals do not show signs of an imminent recession. We will continue to watch the data closely, and as always please let us know if you have any questions.
Investing involves risk including the potential loss of principal. No investment strategy can guarantee a profit or protect against loss in periods of declining values. Past performance is no guarantee of future results.
Email sent 12/26/18
I hope this note finds you well, and enjoying the holiday season!
If your family is anything like mine, one topic that has been on the top of everyone’s mind this holiday season is the decline of the market since early October. A few questions that I have been asked by a number of family/friends/clients of late is what is causing this, and when does it stop? While it might not be the answer that instils the most confidence - in reality no one knows. The fact that it is unknown won’t stop people from trying to answer both definitively.
With everything going on in the world today there are plenty of ‘headline ingredients’ to choose from when the market goes up or down. Tariffs, trade wars, government shutdowns, inverted yield curves, The Federal Reserve raising rates, and international economies slowing have been a few of the favorites of late. The truth is that there’s no way to say that markets are going down (or up) based on any one factor. Even if we could identify the reason for the change, it would likely be of little use since the market moves based off information at an incredibly fast pace.
Money is emotional, and it is personal. Headlines and declines like the ones we are seeing can cause us to make emotional decisions. My number one job as your advisor is to help you make sure you don’t make emotional decisions at the wrong time that are detrimental to your financial future. As you prepare for year-end statements and seeing your personal numbers changing this quarter, please take a moment and keep your long-term financial goals in mind.
In hopes of not leaving you with too much negativity this holiday season, it is also important to point out that market corrections like these are normal. Normal does not make them any less scary in the moment, but they happen and likely will again in the future. If you would like to find a time to review your financial plan please reach out, I will be right here.
Have a wonderful holiday season, and here's to 2019! Andy