A quote from the TV show “The West Wing”.
“This guy’s walking down the street when he falls into a hole. The walls are so steep that he can’t get out. A doctor passes by and the guy shouts up ‘Hey you. Can you help me out?’ The doctor writes a prescription, throws it down the hole and moves on.
Then a priest comes along and the guy shouts up ‘Father, I’m down in this hole, can you help me out?’ The priest writes out a prayer, throws it down in the hole and moves on.
Then a friend walks by, ‘Hey, Joe, it’s me. Can you help me out?’ And the friend jumps in the hole with him. Our guy says, ‘Are you stupid? Now we are both down here.’ The friend says, ‘Yeah, but I’ve been down here before and I know the way out.’”
Stocks have had their worst start to a year ever. They have retested their August lows. Most stocks are down 20% or more from their highs, including the Russell 2000 and transportation stocks, that are in bear market territory.
Drawdowns of 5% or more are normal during a market cycle. Since 2009 these have been 16 pullbacks above 5% and 5 of them 10% or more. In spite of this happening, the market has had above average returns. The concern, among others are, oil prices, China, presidential election, interest rates, valuation and the swift fall of the market. This could test the resolve of even the most bullish analyst. It’s understandable that one would feel nervous as markets fall and the media exacerbate the situation with their scary headlines.
Securing your life style objectives through diversification and having non correlated investments should help you keep focused on long term investing. In addition, investing within your risk tolerance will assist you to prevent getting caught up in shorter term swings.
Brilliant investor, Shelby Davis, of Davis Funds said, “You make your money in a bear market, you just don’t know it at the time.” When there is dislocation in the market it creates opportunities. We are working hard to exploit these opportunities.
So, what to do now? Stay calm, make sure your allocation is right for you and contact us if you get nervous, we will get through this together.
So, what to do now? If you have a client, friend or colleague that’s nervous about the market, would like a second opinion or would like to take advantage of the climate, call us for help. We have been down here before and we can help with a way out.
So, what to do now? Make sure your allocation matches your risk tolerance. Call us if you are not sure or would like to take advantage of opportunities in the market. We have been down here before, so contact us and we can help you with a way out.