Looks like the cold I mentioned is now a full on flu. We have mentioned many times over the past year that a correction is “due” but not necessarily imminent. 2013 was a year in which we felt the economy and the market were way out of sync. The US economy was still fairly sluggish yet the markets did not care. A lot of companies were doing stock buybacks and the Fed keep rates basically at zero. Fast forward to now where the labor market is strong and we are starting to see signs of wage improvement. Yet, the US markets are giving us this current drawdown.
It wouldn’t have made sense to adjust a portfolio for the possibility of a correction and it certainly doesn’t make sense to change your portfolio during a correction. Could markets decline continue even deeper? Sure, but at some point fundamentals overtake emotion and money comes back into the market. As for our recommendations during this pull back…we recommend you try to stay away from the financial media. The pundits will be out in full force likely giving their predictions. If they were honest they would say they don’t really know what is going to happen but then they wouldn’t be on air or in print. Avoid the rubbernecking.
If you have cash on the sidelines then this is certainly a buying opportunity but don’t assume its a good time to buy a particular stock. Stick with the allocation you have and add to it. Remember, your current allocation is based on your risk.
To our younger clients, if you weren’t investing much in 2008 then this may feel like the end of the world. It’s not. But, if you are genuinely concerned please call us or email us. You should feel concerned. It would be odd if you didn’t.
As always, let us know if you have any questions or just want to talk through your current thoughts.