Critical Market Update 11.24.18
Time to retest
Here we go again. Another precipitous stock market drop causing me to write another “Don’t panic unless it’s necessary” update. Only this time I explain not from a hotel room in D.C. but from 36,000 feet on my way to Boston for the holiday.
Happy Thanksgiving by the way. Don’t let the market ruin your dinner. Things are fine and the next holiday should be much better accompanied by a strong Christmas rally.
The drop we’re experiencing now was very much expected and quite necessary. On a technical basis it is called a “retest”.
Whenever stocks drop into correction territory, such as it did in October after falling about 13%, the market has to go back and retest that level.
The Dow fell to 24,443 on October 29th. From that low it had a decent rally. Unfortunately however, it almost always has to go back down to that level at least one more time and test it.
If it fails, then that’s the new low. If it holds within 1-2%, as I expect it will, then the correction is over and the market can resume it’s uptrend. Just in time for Christmas and the beloved Santa Clause Rally.
Yesterday, Tuesday the 20th, the Dow touched 24,368. Pretty much text book. Of course it can dance around this for a while so don’t be alarmed.
The catalyst for the market’s behavior is to get the Federal Reserve to stop raising interest rates. “Enough already” most pundits are yelling, feeling that they have raised rates enough and are where they should be to sustain economic growth and keep inflation in check.
This temper tantrum the market’s currently throwing is quite common and should not be cause for alarm nor panic. The market has a long history of acting up when it doesn’t get it’s way.
I suspect the Fed will espouse it’s independence, saying it will not be swayed by anyone or anything….followed by its acquiesce by not raising interest rates and adopting a wait and see attitude that is based on current conditions.
The bottom line is that the economy stills appears very strong and inflation well in check. Of course there will be some slowdown with the major benefits of the tax cuts already absorbed, but that was to be expected.
This looks to be just another normal correction in an ongoing bull market. One missing element would be more of a panic to signify the bottom. I definitely wouldn’t mind seeing more of a panic amongst investors. A good panic where frightened inexperienced investors get out at the bottom is very good for the long term health of the market.
I am fully aware that pullbacks are painful, they always are. However, they have a way of fading fast from memory once they are over.
Worry not. If conditions do change which warrant a change in course, we will take action swiftly and deliberately. It’s what we help do for our clients everyday.
For now, stay the course, provided you have a solid plan and are sticking to it by investing “tactically” so you can react quickly when necessary, (never buy-and-hope) and have an asset protection strategy firmly in place like we do with Wealthguard. It’s what we help our clients with everyday.
Of course, don’t let this affect the time with your family. You can’t get that time back.
I’m sorry that I had to talk business in my “Happy Thanksgiving” letter. It wasn’t planned but that’s how it goes.
If you need to reach me for whatever reason, even during the holidays, don’t hesitate to drop me a call.
P.S. From all of us here at Springer Financial Advisors, please have a happy and healthy Thanksgiving holiday!