Help, the sky is falling!
Ohhh, the beauty of market unpredictability. We’re in the midst of a market pullback despite all economic indicators looking strong, and this is completely normal.
Here is a letter written by our CIO accompanied by a Volatility FAQ created by our firm that we sent to our clients and partners earlier this week.
Bottom line? Stay the course. Don’t pull to cash. Don’t panic. It’s business as usual for the stock market.
For reassurance, look at this chart I pulled from our FAQ. It highlights the largest market drop in the S&P 500 each year since 2008 - AND ONLY THREE OF THOSE YEARS ENDED IN 0 OR NEGATIVE RETURNS.
Here is a copy of the letter from Ben we sent:
"Well, this past week hasn’t been very enjoyable for investors who are also Pats fans! I have been through a number of market downturns, as have you, and they are all very uncomfortable. I understand how downright nerve-wracking these can be…especially after the wide fluctuations we are all experiencing the past few days. However hard it is to watch, we all know that the vast majority of these corrections are short-term in nature. While we have had some positive performance the past few years, it is not uncommon – at any time - to see things turn unexpectedly in the opposite direction. In fact, it is perfectly normal.
WHAT SEEMS TO BE THE RECENT BAD NEWS?
In this particular case, there isn’t much bad news out there to which to point. In fact, the economy seems to be on VERY solid footing:
-Corporate earnings are very good.
-The economy continues to add jobs at a robust pace.
-The newly passed tax-plan is expected to benefit the masses, as well as Corporate America. The effects of which could realistically carry the economy for quite some time.
Aside from all the positive, the fact remains that downturns are a very normal part of investing. They just always seem to sneak up on us without warning, and never cease to cause anxiety.
HOW LONG WILL IT LAST?
Nobody knows. This could last for months, or could already be done. I have been through enough of them to know that it will most-likely be short-lived. And whether the market is up tomorrow, or down again, it doesn’t change my overall opinion that the economy will continually adjust and move forward and that the long-term view is fully intact.
WHAT SHOULD YOU DO?
Nothing. Our team here researches all the companies in your portfolio, and we keep track of them on a daily basis. When our strategy analysis calls for a change, we execute it on your behalf. It is important to remember that short-term market movements never drive our decision making. Your long term success is our focus. ***It is important to talk to us if anything non-market related has changed (short-term liquidity needs for capital, etc..) and we encourage you to contact us immediately to discuss).