Many of you are starting to receive your end of year statements from your investments and many have noticed a decline in value over the past quarter. The volatility we saw in the last three months brought the entire markets into negative territory for 2018. The Global Dow was down 11.3% for the year and the S&P 500 was down 6.24% in 2018.
Even though these types of market drops are dramatic – and disconcerting – it’s important to note that nothing unprecedented is going on. Short-term volatility is very normal.
We are currently experiencing a market correction, which actually happens quite frequently. A market correction of more than 10% has happened 22 times out of the last 39 years (starting in 1980). Of those 22 corrections, only 4 of them actually turned into bear markets where the market declined by more than 20%.
So is this one of those times? Of course we have no way to know but we don’t think so.
Looking back through history, all of the bear markets that have happened have had one of four things happening within the macro environment. They are: Recession, Commodity Spike, Aggressive Fed policies, or extreme valuations. We do not currently have any of those concerns in the present market.
In contrast, we actually see the opposite.
U.S. economy fundamentals are strong. Commodity prices are reasonable. The Feds are being careful with interest rates rising and valuations are sound for investors with a long-term time horizon.
We feel that the volatility we have been seeing lately is not an indication of recession but rather a response to a lot of “noise” we see regarding trade wars, the government shutdown, and interest rates.
We want to stress that we are here to guide you, to explain the implications of market events to you and to work with you toward your financial goals. Please remember:
· If you have a question, contact us. Together we’ll address any concerns you have.
· Please remember that investing is a long-term prospect.
Again, please don’t hesitate to reach out to us should you have any questions or concerns. Meanwhile, we wish you a happy, healthy, and prosperous 2019!
Kramer Wealth Managers team