simplifying financial management for CORPORATIONS & INDIVIDUALS

News

Get the latest information here

Not The Year End Performance We Had Hoped

This is not the email that I wanted to send out at this time of year 😀 I rather send one that was more festive 🎅 🕎 I hope everyone has safe travels 🚗 and takes the time to enjoy good food 🍲 and family time.

Bear markets are scary. Crashes are scary. Corrections are scary. But that's exactly what they are.

Here are the facts:

  1. Since its beginning, the stock market has averaged at least one 14% drop, from peak to trough, per year.

  2. Daily dips of 2% or more happen, on average, at least 5 times per year.

  3. Roughly every 5 years there is a major panic (for whatever reason) that leads to a 30% correction.

  4. 2017 was one of the calmest years on record for the stock market. 2018 is a reminder of what can actually happen.

  5. Cash positions are important because it allows us to buy dips.

Typically the largest market corrections take place during recessions. Will we have a recession in 2019? I don’t think so.

What to Do

The first and most important thing to do is not panic. In fact, that’s so important that I’ll make it the first and the second thing to do! Remember Warren Buffett’s famous quote: “Be fearful when others are greedy. Be greedy when others are fearful.” Right now, there’s a lot of fear.

Don’t concern yourself about waiting for the absolute bottom. In retrospect, people think of “the low” as some big event. In reality, no one realizes it at the time, and it usually happens a lot faster than we think. You can be sure there will still be people predicting the next big leg down.

In 2008, a major low came in November. Although this wasn’t the absolute low, it was a good time to buy. At the time, people were massively freaked out, as they are today. The VIX was at 80. That’s crazy, but the prices were good.

After 9½ years, one of the longest bull markets in history is showing it’s tired. What started out as minor downturn in October has, since December, turned into a major sell-off. Ever since President Trump referred to himself as “Tariff Man,” the Dow has gone down nearly 3,000 points.

No downturn has a single cause. This week, the Fed raised interest rates again, and it sees more hikes coming next year. The market reacted swiftly and negatively. The government shutdown was on people’s minds, mutual funds have capital gains distributions, it’s the end of the year….take your pick.

How much more will this last? Beats me, but selloffs usually end before anyone realizes it. Since its closing high three months ago, the S&P 500 has lost 15.8%.

Traditionally, a 20% drop is considered a bear market. In the short-term, the key for us to watch is the 200-day moving average. Whenever we’re below the 200-DMA, as we are now you know that the seas will be rough. Expect more volatility. We’ll get jerked higher and lower a lot, but once we clear the 200-DMA, things will get a lot calmer.

Maria and I want to thank you and wish everyone a Merry Christmas 🎄 and a Happy New Year 🎆. Here’s to a good 2019.

maria amado