Monthly Archives: February 2018

Stock Market : Points, Percentages, and Perceptions

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Dear Mr. Market:

What do you think about the “largest point decline in history” ?!?pl9401-1-_custom-99c12255409cbb9e488da1fb6ce0900b683cda9d-s6-c30

Last Monday certainly wasn’t fun for anyone watching their portfolio but if you put things into perspective what you end up with was the 138th largest percentage drop for the S&P 500. The financial media predictably goes bonkers when reporting numbers and this fuels the fire for the average investor. Our beef with them isn’t even the “sky is falling” antics which happen on any big volume or down day but the fact that they skew reality.

We’re not trying to minimize the strong move or the fact that we’re finally seeing volatility back in the markets but keep your common sense hat on when digesting the results. First and foremost, when an index like the Dow Jones is almost at 27,000 points, simple math shows that a -5% drop will equate to about -1,350 points. A five percent pullback is not only par for the course but as we mentioned in our most recent article…very much needed and of course long overdue. With a total of just over -10% we finally have (by definition) reached a correction.

Who knows what Mr. Market has in store for us tomorrow but one thing we can almost guarantee you is that the financial media will be far more excited about it than anyone needs to be. Hysterics and click bait sells more than a rational report explaining stock market action that is actually not unusual nor completely out of historic proportion. Speaking of reports…we invite you to read this special update on our Columbus Strategy.

Click here to read the Columbus Strategy -2018 Stock Market Volatility Report. 

Maintaining-Discipline-in-the-Face-of-Market-Volatility-1What matters most in times like this is to level set things and to have a disciplined strategy firmly in place. Our signature approach for accounts over $100k is the Columbus Strategy and aside from its long-term track record what gives many clients some peace of mind is knowing that it ultimately looks to mitigate large and extended stock market drawdowns. We’re not so much focused on one month but over the course of a full market cycle you will be hard pressed to find a strategy that does better.

Nobody can consistently time the market but there are certain tactical adjustments that can be made to at least avoid longer stretches of market chaos. If we were to be visibly headed for a recession our stance on this recent correction would be much different than it is now. For the time being we’re approaching this correction exactly like we should be since it’s not our first rodeo; we’re nibbling at positions that we’ve wanted to add to and rebalancing any allocations that are not in line with a portfolio’s respective strategy.

Other than that the absolute worst thing you can do right now is act human! While that sounds crass we’re simply reminding you that people tend to have short memories and get way too emotional. If you want more information on our Columbus Strategy please contact us. Beyond that we will leave you with a quote and saying that we came up with many stock market corrections ago….1607859

“Stay disciplined to stay positive”.

-My Portfolio Guide

 

 

No More Groundhog Day for the Stock Market

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Dear Mr. Market:b67ec80ba6cb4509b60ab9f52cb984e8

Have you seen the movie “Groundhog Day”? If you haven’t it’s comedy-fantasy from 1993 starring Bill Murray. In this movie he portrayed a Pittsburgh weatherman who was on assignment to cover the annual Groundhog Day event in Punxsutawney, Pennsylvania. Murray’s character ends up being stuck in a time loop where no matter what he does he ends up repeating the same day again and again.

Until just the past couple of days it feels like the stock market was also trapped in some sort of Groundhog Day paradigm. We have not experienced a correction in over 15 months and no matter what the headline the results on the markets where the same as the day prior; green, positive tickers, and smooth sailing. We just saw the best January in 20 years after a year where the S&P 500 recorded a positive return every single month for the first time ever. All these records transpired with the lowest market volatility ever.  So what just happened?

Did the groundhog pop his head out and cast a different shadow than anyone was expecting? No…not really. Everyone we know (layman or expert) has been saying eventually it would end. Nothing keeps going up forever. While we disagree with lightweight analysis that stocks are overvalued, the bull market eventually has to take a breather in order to make a final push higher. There is no recession in sight so what we’re finally seeing is a long overdue correction.

What is a stock market correction?

It’s been so long that it might be helpful to refresh your memory! First and foremost, you must recall that prior to Groundhog Day (sorry…couldn’t resist!), stock market corrections happened all the time! On average they occur once every 357 days, or at least once a year. They’re part of the economic and stock market cycle and for a healthy market to advance you actually should want to see them pull back every so often. We have strong fundamentals right now and things are trending in the right direction otherwise we wouldn’t be minimizing this recent market action.

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By definition a correction is -10%. (a pullback being in the -5% range) A full on bear market is where we would see -20% or more from peak to through. With the average correction, not only can it not be predicted, but by the time people figure it out it’s too late and the market is back to moving higher. Continue reading →