The last few weeks (and months) of volatility have told us that we’re sailing in stormy waters.
This is a quick note to tell you that it’s going to be OK.
A few things I’d like you to keep in mind right now:
“Unprecedented” events can happen much more often than we’d like and make predictions nearly impossible. The world changes not gradually but in accelerated bursts that can leave us clinging to old trends and expectations that no longer fit our new reality. We’ve gotten used to low interest rates, strong market performance, and less volatility over the last decade.
But it looks like we’re heading into more challenging territory.
Here’s why it’s going to be OK:
We’ve been here before. Not this precise moment in time, of course, but… We’ve planned for situations like these, where we see harsh conditions, but we don’t know exactly how they will play out. Client investment strategies are built together and are designed to withstand these kinds of storms.
Always keep a fresh perspective…
Here’s a very good market fact I read this past weekend from one of our portfolio managers, Howard Capital Management.
21% of stocks are above their 200-day moving average and 79% are below their 200-DMA which means the odds are 89% that stocks are higher in 12 months. Historically speaking, when stocks have had this kind of selloff markets have tended to see a bottom.
Last week put the S&P 500 into a waterfall selloff seen only 18 times since 1940. During the week, stocks were down 5% for the week and had declined 16% in the past 5 months. Declining 16% in 5 months is a waterfall collapse. Waterfall declines show investors are now liquidating stocks with emotional fear taking hold. There are 13 waterfall selloffs since 1970. In 9 of the 13 most recent instances, the S&P 500 was often near the end of its decline.
The S&P 500 roared into the close Friday, closing positive on the day at 3,901.36. The VIX closed at $29.43. The S&P 500 has still fallen seven weeks in a row, its longest losing streak since 2001. It recovered from its plunge into bear territory, but it’s still down 18% this year. 2022 is a midterm year, which typically experience a 17.1% average drawdown from peak to trough. When considering market cycles, this midterm year isn’t much of an anomaly.
I’m not saying this is a bottom and any attempt to predict one is a fool’s mission, but many indicators and market actions are pointing we may be very close.
Most importantly, you are not alone.
As an advisor, I’m here with you and all my clients. We’re in this together and I have great concern for your wealth and circumstances, a if they were my own. We’re all surrounded by amazing family, friends, and our community. We don’t control what happens in markets, the economy, or the world.
We can be grateful for our blessings and focus on what’s within our control: our mindset, our behavior, and the actions we take.
We make it through these times by connecting with who and what matters most to us.
I’m grateful for your and all my clients presence in my life. Many of our relationships date back more than 20 years. We’ve endured many events together since then, but here are just a few reminders: Dot.com Bubble, September 11th, Iraq/Afghanistan Wars, Credit Crisis, US Debt upgrades and downgrades, Real Estate Bubble, Banking Crises, The Lost Decade, Flash Crash, Impeachments, Pandemics, High-unemployment to Low-unemployment, a barrel of oil which cost high single digits to $145+… We’ve seen a lot, weathered many storms, yet here we are.
Over 21+ years if you could have removed the fear, here’s what we’ve seen in market levels.
Level January 1st, 2000 May 24th, 2022
S&P 1,394 3,941
DOW 11,501 31,928
NASDAQ 4,186 11,264
If only we could have the foresight, to remember all of life’s past lessons, and no longer have to wish on using hindsight…
I hope you’re doing well. School is out, graduations are happening, and for those of us not wintering in Florida, summer is just around the corner. Have a blessed upcoming Memorial Day Weekend!