Good morning on a Saturday,
And not just any Saturday. The Saturday just 3 days before Christmas! And, the Saturday following a week of sharp stock market declines and abrupt political events. In fact, a Saturday capping off an entire year of unfamiliar volatility and weakness in the stock market.
I took an extra day this week (TGIF +1) to check the path of stock markets year-to-date to present perspective and a few encouraging thoughts:
Perspective
After a positive start to the year (in January the S&P 500 was up 6.5%) the Dow Jones and S&P 500 averages each stand down roughly 9.5% for 2018. Each index was down about 7% this week alone.
We had grown unaccustomed – for nearly 10 years – to any major year-end market declines. Although consider that earlier in 2018, the S&P 500 experienced near 10% declines – within both February and October! In years 2015 and 2016 each year began with January declines of over 5%. The sting may have been relieved when recoveries by year-end erased a good portion of each earlier decline.
Fast forward to the present month of December in which stocks are down roughly 13.5% for the month. These yearly and monthly figures present a fair amount of volatility BUT not volatility that is terribly out of line with market history from the past 40 years.
Recall the data I have presented in prior editions of TGIF 2 Minutes that points to the average intra-year decline from high to low in the S&P 500 index of -14%*. That is the average decline EVERY year since 1980. Recent years have been far, far below average. Leading us to this year when the averages have caught up with us.
Encouraging Thoughts
My clients know their portfolios are designed to account for this kind of volatility.
The fact that my clients have chosen to work with me as their adviser is a sign that they understand the amount of cash they need in their portfolio for their lifestyle and in order to sleep at night.
My clients understand the concepts of longevity (life spans are increasing), increasing healthcare costs, and historic stock market gains (despite volatility) enabling assets over the long-term to keep pace with inflation.
My belief is that my clients know all of these things already. BUT that does not mean that it may not make them, or you, feel better to give me a call to talk through your portfolio and review the psychological side of saving and investing for the long-term. I may have already called YOU.
It may be that we have talked about the possibility of a steep decline so many times that you have been working, shopping, cooking and singing Christmas carols for the past week.
My guess is that it has been difficult to ignore the market declines even for the most steadfast of investors. If you need or wish for reassurance (we are all human!) please do not hesitate to call me. That is what I am here for.
*Source: Standard & Poor’s, Fact Set, JP Morgan Asset Management. Returns based on price and reinvested dividends.
Thank you for reading, Merry Christmas and Happy 2019!