Critical Market Update
Critical Market Update
Although it’s been a good year for stocks, the month of May has been dismal. In the last 30 days we have seen a drop in the S&P 500 almost 6.5% and -8% for the Nasdaq. Worse yet, many investor favorites such as Apple have lost over 15% just since the beginning of May.
Market pullbacks like these always leave a little ping in your stomach. Even though you know the decline is temporary and a necessary evil, it still hurts. The normal response is that action should have been taken to prevent it, or worse yet, some panic and sell.
The truth is that unless there is a significant fundamental change in the economic landscape, you ride it out. Although, prepare for possible shock when you open your May statement, especially in dollar terms.
Those who try and time it by selling into the weakness end up getting back in higher than where they got out.
So that begs the question, is this sell-off caused by a financial indicator signaling danger? No, I see nothing of the sort. This is just politics. Specifically, the trade war with China and now a new twist with Mexico.
So, does this sell-off warrant action? No again. This is a normal, albeit a pain in the ass correction that is quickly forgotten about once the uptrend continues. The U.S. economy is still very strong, unemployment is low, inflation well subdued, the banks are in good shape and most importantly, corporate earnings are extremely robust. If anything, this is probably the best buying opportunity we’ve seen all year. I think this will be behind us soon and stocks will be significantly higher by year end. We will just have to muddle through the mud to get there.
Remember, now that we are between earnings seasons, the only news investors have to focus on is the headlines, and they are never good. The trade war was just as important a month ago when stocks were rising during the great earnings announcements we were getting; it just wasn’t as important as earnings.
As unnerving as the market is, keep faith in your Personal Retirement Master Plan and stick to it. Naturally, all financial plans and individual portfolios must be stress tested against nearly everything imaginable: bear markets, corrections, crashes, trade wars…. etc. to help you achieve your objectives, regardless of what the market throws at you. Things we do for our clients every day.
If you need to talk to me about the market, or anything else, please do not hesitate to call.