Just wanted to give you all an update to the markets. We wrote this email back on Thursday, December 20th, but had to get it approved prior to sending it. Happy Holidays and Merry Christmas.
As we write this email, the stock markets are down again today. Since the market highs on October 3, the S&P 500 Index has declined more than 15% and is down over 7.5% for the year. Other stock markets have fared worse with international stocks down over 16% for the year. Like many stock market declines, it has been swift and fast and the usual fears and concerns are on the minds of you, our clients.
We continue to recommend a long-term approach. As bad as things have been recently (December is on target for the worst investing month since February, 2009, right before the last bear market bottomed out,) the S&P 500 Index is still up over 10% since the beginning of 2017 and up over 20% since the beginning of 2016.While no investor likes to experience a decline, they actually help the markets in the long-run.
Investing fundamentals remain strong. Unemployment is at its lowest level ever. While there have been some negative earnings surprises, corporate profits remain strong. Most economists do not see a recession on the horizon until at least 2020. There does not appear to be an obvious market bubble such as the technology stock run up of the late 1990’s or the housing crisis of 2006 – 2008.
We do have a strategy moving forward. The long-term indicators that we follow are still in positive status, but they are approaching negative levels. If that threshold is crossed, we will start to pare back our equity positions, primarily in the small-cap and mid-cap areas. We will not get completely out of stocks but we will reduce our holdings to protect the portfolio from further declines.
We continue to believe that a long-term approach is the best course of action. Market declines are part of the overall investment spectrum and trying to time one’s way in and out of the market is difficult. You have to be right twice, getting out at the right time and getting back in at the right time.
If you have any questions or concerns, please contact us.
Jim and Spencer
Indices mentioned are unmanaged and cannot be invested into directly. The S&P 500 is a market-cap weighted index composed of the common stocks of 500 leading companies in leading industries of the U.S. economy