Your Portfolio in Today's Market
As you know, the stock market has been in the midst of a sharp sell off over the first half of October, which has now erased the year’s gains in both the S&P 500 and the Dow. Smaller stocks and higher yielding bonds have been hit hard as well. As of Thursday October 16th, we are close to correction territory.
Global events have overtaken employment and earnings gains, and the concerns of investors over rising interest rates have been
replaced by concerns of a growth slowdown.EU economies are near recession, for the third time since 2007, and China’s pace of expansion has also slowed, leading to investor concern about earnings and profits going forward. We can add to this the expanded role of the US in the fight against ISIL, and the uncertainty about how it might develop, as well as the Ebola virus gaining a foothold in the US. Taken together, these things have shaken sentiment enough to trigger this painful reversal.
There are a few things we want to share with you at this point concerning the current market volatility.
First, we are available to you at all times. At The Bedminster Group client communications are our highest priority, particularly when markets are in turmoil. Don’t hesitate to call to discuss general or portfolio specific concerns.
Your investment strategy continues to work, even in this challenging environment. Balanced portfolios have been shielded from the worst of the decline. In fact, values on most of the bond investments in our clients’ portfolios have risen, even as stock prices have fallen.
We have often said that the time to plan for bad markets is when markets do well, and I believe we have done that. Your particular asset allocation and investment plan was developed to balance preservation of capital, income and growth, with particular consideration of your unique circumstances, and how the portfolio would hold up when markets move against us. Our process of periodically rebalancing has kept stock allocations in line with risk tolerance even as portfolios have grown in value
Historical perspective can help us lower the level of anxiety from these episodes so we can more clearly see them for what they are, and what they may become. While impossible to predict, declines like this are not uncommon. Since the market hit its low point in March of 2009, we have had three of these corrections, first in 2010, when the S&P 500 fell 16%, in 2011 when the US debt was downgraded and markets fell around 16%, and again in early 2012, when the market fell nearly 10%. Looking back over more than a century, we see that declines of between 10 and 15% have occurred on average once a year. In most cases markets recover and move ahead fairly quickly; although at times recovery can drag out for months or longer.
We have a great deal of experience (nearly 30 years) encompassing many market corrections as well as deeper periodic declines, in helping our clients maintain a consistent investment strategy in the face of market turmoil, and keeping them on the right path, and out of harm’s way. We trust that together we will do the right things.
Registered Investment Advisor
The Bedminster Group