Money Pulse Bulletin – White Knuckle Time

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January 8, 2016
Money Pulse Bulletin – White Knuckle Time

Our guess is that many of you may be concerned – even white knuckled over the wild volatility, especially of the past week. We certainly don’t like it either but we’re not overly concerned. Let us share some perspective with facts with you to serve as an antidote to help calm your fears as well as give you hope to hang in here.

Feelings & Facts

  • First of all we understand the fear – this kind of volatility feels absolutely horrible and is scary.
  • We don’t think the current volatility reflects either domestic or global economic conditions going forward in spite of the current volatility or the hype from the media.
  • The Leading Economic Indicators for the U.S remain strong as do the global LEI’s and since 1959 there has never been a recession with these metrics in place.
  • Additionally, the US market always gets squirrelly as we enter election years, kind of like we humans do.
  • Yet most election cycles coming off a two term administration tend to do well regardless of what party may win because the electorate becomes restless with the outgoing administration and looks forward to a change with a hopeful outlook.

Hope

  • Out of the past 20 presidential 4th years the S&P 500 has had a positive return for 17 out of the 20!
  • From 2007 up to March of 2013 the S&P 500 only had one record breaking high.
    • Since March of 2013 to now this bull market has produced over 107 record breaking highs for the S&P 500

Financial Suicide

  • There is such a thing as financial suicide. That’s what can happen when investors bail out without an urgent need and miss the opportunity costs riding the market back up.
  • Example: in 2014 the S&P returned 13.7%. If you had gotten out of the market and just missed the best FIVE days your return would have dropped to 3.2%.
    • In 2015 it would have only taken missing the THREE best days to alter your return negatively.

2015

  • We realize that 2015 was a rough ride with overall disappointing returns – like riding and staying on a bucking bronco and getting the blisters but not the winner’s prize.
  • But a closer look at globally diversified portfolios will demonstrate that owning asset classes that have done well in the range of 8-16% is far more hopeful than being concentrated where there are no gains. So look to those out performers which represent the fruitful gains during scary times.
  • And please don’t hesitate to call if you have concerns or questions. That’s what your advisor is for. DON’T WHITE KNUCKLE IT ALONE!