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Thoughts on The Market

February 06, 2018

The last few days in the market have been a wild ride as the Dow Jones Industrial Average saw a 1175 point decline on Monday.  But in times like these it can be important to think in terms of percentages, not points.  Although it was the single largest day drop in history, it was just the 108th largest percentage decline (-4.6%) since 1900.  It's also important to keep in mind that the market hadn’t seen a 3% or more correction since the election almost 15 months ago.  This extremely low volatility in the stock market is rare and has not been witnessed in over 50 years.

As of this writing (Market close on February 5th), we have seen the Dow Jones Industrial Average lose more than 1800 points since the beginning of February, just a few days ago. Furthermore, if this decline continues, panic will start to hit investors’ emotions. 

We believe this correction is much needed and will help propel the markets higher over the course of this year.  We believe that a recession, or at least conditions that lead up to one, is a major cause of bear markets (defined as a decline of more than 20%).  At this time, we do not feel a recession in the near future is very likely.

It is also worth noting that since 1962, there have been declines in all 14 mid-term election years.  Although 2018 is a mid-term election year, we're advocates of sticking to one’s investment plan, and at this time, staying put and thinking long-term.  If you were looking to add to your equity positions, you may want to consider doing so if this correction continues. 

We anticipate many positives for the equity markets this year.  These include the continuing global expansion which is good for the US economy, an excellent environment for corporations to grow their earnings with a reduction of corporate taxes, a significant decline of the US dollar (good for exports), and improving regulations for businesses.

As always, don’t hesitate to reach out to us with any questions you may have regarding your overall portfolio, asset allocation, or the amount of risk you may be taking.




The opinions voiced in this material are for general information only and are not intended to provide specific advice or recommendations for any individual. All performance referenced is historical and is no guarantee of future results. All indices are unmanaged and may not be invested into directly.

The economic forecasts set forth in this material may not develop as predicted and there can be no guarantee that strategies promoted will be successful.

Stock investing involves risk including loss of principal.