Stock markets: Winter Cold or Serious Flu?
The Dow fell 666 points on Friday, February 2nd. Today, Monday, as of market close, it has lost another 1,175 points. A spike in interest rates and concerns over inflation are the most likely culprits, although markets can correct for any number of reasons. Pointing out the obvious triggers doesn’t add much to our understanding, and tends to confuse causality with correlation. One positive, there are few signs of recession or hyper-inflation, both of which can signal longer-term trouble for markets, and while valuations have risen over the last year, they are not excessive in our view (certainly not after the last two day's selling.) Still, a simple cold and a serious case of the flu can start out with similar symptoms…
While market pullbacks have been very rare over the last year, that is the exception rather than the rule. This correction was not unexpected, although its severity was a surprise. Our balanced investment approach is designed precisely for times like this, to provide some protection for your portfolio from the worst of stock market volatility.
We maintain cash reserves in client portfolios that will enable us to take advantage of market pullbacks. Market declines often provide great opportunity for investors like our clients, who have a strategy for both good and bad markets, and an investment plan that provides continuity, consistency, and grounding, when others lose focus and let emotions rule.
It is way too early to determine whether this will be a short-term reversal, or something worse. In any case, we will continue to keep you informed.
We know that good communication is most important when markets are troubled. If you would like to discuss the current market conditions, how they affect your investments, or any related matters as we move through this period of uncertainty don't hesitate to call us at (843) 705-5544.