I hope you all had a great Thanksgiving with family and friends and time to be grateful for all that we have. One of the things we are so appreciative of is your business. We value our relationship with you, your families, and your businesses. We recognize that you have choices regarding financial planning firms, and we are so blessed to have you as part of our Legacy Wealth Alliance family. My desire is the hustle and bustle of the holiday season does not have you so stressed that you can’t enjoy continued time with family and friends and possibly a kiss underneath the mistletoe (my personal favorite).
As the markets continue their volatility and declines, it is important to us that you receive increased communication. We believe strongly that part of our value to you as our clients, is that we share our thoughts when the financial markets do not behave as we would like. You may recall that 2018 did not start off well for the domestic indexes. There was not one but two 1,000 point plunges for the Dow in February. That was followed by reaching its all-time high point in September. Since then, the market continues to see triple digit volatility and a slow decline. When we communicated last month, 3rd quarter earnings season was very strong with a large percentage of companies beating or hitting their expected earnings. In addition, unemployment is the lowest we have seen in 49 years and wages are improving.
Following October was of course the elections. I hope you all cast your ballots. The market in general, does not like uncertainty and with political division in our country, the elections bring plenty of uncertainty. While the historical financial data does not seem to favor Republican or Democrats, there was improved certainty, in most states, the day after the elections. Due to both the strong 3rd quarter earnings and the election being behind us, we were hoping to see the market hit a “bounce” and head back into positive territory as it did in March of this year. Being almost into December that has not happened and the domestic and international indexes continue to go down. It may be good a thing we are headed into the holiday season.
Our economy (jobs, corporate profits, etc.) depends on consumerism; money in motion. While our economy seems very healthy at the moment, the stock market appears to have caught a “cold”. Consumer confidence, how people feel about their jobs and how likely they are to spend money, is the highest it has been in decades. Therefore, this could equate to holiday retail season being very favorable. If this happens as projected, then 4th quarter earnings, due to be released beginning in January 2019, should also be strong, at least in theory. While we can’t predict what is going to happen, we are hoping to see the “bounce” we have been wanting. If the projections are wrong, and 4th quarter corporate profitability miss expected earnings, then we may see the continued decline of the stock market. There are also discussions that much of the decline is due to the trade wars that are going on between the US and many countries abroad. Should these trade wars “subside” we could see some improvement. The markets are not having challenges only in the US, this is a global issue at the moment. There is hope these market declines will force nations to come to “terms” on their trade agreements and that this could lead to market improvement. Case and point, the US and Mexico signed an agreement at the end of August and Canada joined the pact in September. This led both countries to have a recent increase in strength compared to their international peers through these negotiations. However, there is still much left to do.
As we have discussed during your reviews, we have had 8 years of a bull market (bulls are good) with the Dow reaching its highest point ever in September; historical and unprecedented. While we build your portfolios taking these declines into consideration and not in reaction to it, it is no less concerning when you see the negative numbers on your statements. As you know, there are always actions we can take. At the same time, it does require patience on both of our parts to see which direction this may be going. A few months since September, is not a very long time and certainly does not make a market cycle.
Here are some things you can do in the meantime:
1. Tune it Out. We are in a media centered culture where they don’t “necessarily” deliver you the facts. Keep in mind that many of you are not only invested in the Dow Jones or the S&P 500 but in other asset classes as well. Please don’t let the “boob tube” become your advisor or take what they may be sharing as if it involves you directly. We are your advisors and know better what is going on.
2. Be patient. Nobody likes to see negative numbers on their statements. However, as you all know, there is risk in investing. The reason behind our investor questionnaires is to understand who you are as investors. We don’t chase what’s hot and leave what’s not. Your portfolios are diversified with the goal of reducing your volatility and taking your individual timeframes into consideration.
3. Don’t stop making contributions. The stock market is on sale from where it was and could continue to become more favorable for accumulators. This is completely counterintuitive. You must have courage to continue to invest in declining markets. Eventually, they will rebound.
4. Focus on shares not dollars. During market declines, and investing consistently every month, you are going to accumulate more shares for the same amount of contribution. If your goals are long term in nature, this is exactly what you want.
5. Overwhelmed, call us. Part of our role at times like these is to do our best to help you either stay the course, or make adjustments if needed. Remember, that seeing the value of your money go down is very emotional. It is for me as well. Equally, remember that “more comfortable” is also an emotional response and our job, as best we can, is to try to prevent your emotions from overriding sound logic.
As you can see, we have not fallen asleep at the wheel. We are on multiple calls and presentation on a weekly basis with experts that we trust in our industry so we can provide you with information as we know it. We are keeping a close eye on what is going on and this is what we have at the moment. As you know, we can’t predict the direction of the market in any way. Only try to make educated decisions based upon the information we are gathering and our experience. Your business, assets, and goals are equally important to us. As always, please feel free to reach out to any member of our team if there is more we can do to assist. I hope you find these overviews helpful as things progress in the markets.