The Market’s in a Bad Mood…You Shouldn’t Be.
It’s hard to ignore the news of the market volatility that has defined the beginning of the fourth quarter. It’s also difficult to tell exactly what is contributing to the angst. It seems as though the market is suffering from a bit of malaise. The economic news certainly is not bad, but it isn’t great either. There are some dark cloud issues that seem to keep everybody in a bad mood; a little bit like how I feel after multiple rainy days in a row. ISIS, ebola, and mid-term elections seem to be taking some wind out of the sails. We recommend clients consider the context of this volatility and take it in stride. The reality is, after a 5 year bull market run, people have seemed to forget that markets go up and down. I have found that people are surprised to hear that this is actually the third pull back we have had this year. Stocks dropped a little over 7% in February, 5% in August and we are down about 8% in the midst of this temper tantrum. 
Looking at a 5 year graph of the S & P 500, we see a defined upward trajectory with pull backs sprinkled throughout, all the result of some media grabbing headline issue that surely seemed to be historical at the time.
The only real convicted sell off came in the summer of 2011 when the U.S. credit rating was cut by one of the ratings agencies. Stocks have rallied about 50% since August of 2011. The fact is, every single pull back during the current bull market run has been a opportunity for investors. Market pundits may cast a weary eye on the future and encourage you to do the same, but up till now they have been wrong every time. As we know, even the most desperate weather forecaster will eventually be right. Well known economist Brian Westbury of First Trust Portfolios recently explained in the Wall Street Journal that an investor who invested in stocks on January 1, 2008, arguably one of the worst times in history to invest, would still have returned over 7% per year. Hard to call that a buying opportunity, but it was. It is important that protection measures be in place before storms roll in. It doesn’t do much good to walk back home to get the umbrella if you are standing in a downpour.
We recommend clients stay focused, take an inventory of their portfolios, and look for opportunities to capitalize on other people mistakes, and rebalance. These are all measures that may reduce risk and help you reach your goals. Please reach out with questions and concerns at any time.
Opinions expressed in this article are that of Steven Higgins and are not necessarily those of Raymond James. All opinions are as of this date and are subject to change without notice. The information contained in this report does not purport to be a complete description of the securities, markets, or developments referred to in this material. The information has been obtained from sources considered to be reliable, but we do not guarantee that the foregoing material is accurate or complete. Any information is not a complete summary or statement of all available data necessary for making an investment decision and does not constitute a recommendation. Investing involves risk and you may incur a profit or loss.
For illustrative purposes only and not indicate of any investment. The data assumes monthly reinvestment and does not account for taxes or transaction costs. Stocks are not guaranteed and have been more volatile than the other asset classes. An investment cannot be made directly in an index. Past performance is no guarantee of future results. The Standard & Poor’s 500 Index is an unmanaged group of securities and considered to be representative of the stock market in general.
