Markets Turn Down
Markets have hit a rough patch to start February after a very strong recent period of performance. We are very lucky to have a wonderful client base that has been through many market downturns. As is my custom in downturns, I'd like offer the following points:
Our outlook is that the national and global economies are in good shape. Stock markets had a strong 2017 and continued to be very strong in January. At one point in January, the US stock market was up 8%. In our view and the view of many professionals it had come too far too fast. A pullback was not only imminent, but necessary and even healthy.
The current downturn in markets began in the US in reaction to stronger employment figures, rising interest rates, and valuation concerns, and has now, not unexpectedly, spread to global markets. For many years, fears have been prevalent that the loose money policies of global central banks would induce rising inflation. It hasn't happened. However, with economies now running strong across the board, the market consensus is that inflation may now rise.
The US stock market historically retreats, on average, 14% at some point during each year. In the past couple of years we have seen much lower volatility than this average, and people may have become accustomed to this environment. Market drops, every year, are normal and healthy, and have the benefit of reminding us that investing is not without risks.
If you think you can predict when market selloffs are going to start and stop, you overestimate your powers – no one rings a bell. Academic study after academic study has shown that no one has the ability to consistently time the market, and your best approach is to adopt an investment strategy and asset allocation and stick with it unless your fundamental picture has changed. I am always available to discuss changes in your heart, mind, or financial picture that might lead to some portfolio changes.
After almost ten years of gains, it is expensive to sell stocks in taxable accounts. It is not a simple decision to incur a 20%+ tax on a large gain. However, our new rebalancing software can help calculate a potential tax bill before we make trades. We are more than happy to model "what if" scenarios ("what if I sell half my stocks in my joint account?") and provide a report to show you what taxes will result.
We held a recent conference call with presentation slides discussing the investment outlook - if you want to hear our current detailed views on the markets that is the best place to visit right now.
I invest my own money in the securities in which I invest your money. I have sold nothing in my account in many months and nothing in the current market selloff.
Contact the office whenever you feel you need to.
As always, thank you for your trust and confidence. Please remember that markets have always rewarded patience and discipline, and punished impulsiveness. So too, I expect, will it be now.
As always, thank you for your trust and confidence. Please remember that markets have always rewarded patience and discipline, and punished impulsiveness. So too, I expect, will it be now.
Leonard Golub, CFA
Fiduciary Financial Advisor