CrossleyShear Market Insights – November 21, 2018

Just a few months ago everyone wanted to plow into stocks, all stocks, especially tech stocks. Then something very normal happened…we had a correction. A correction is a pullback usually around 10% from market highs. Just a few weeks earlier we hit new all-time highs. So what has changed? Not much. A correction happens every 8 months on average. Guess when the last one was…around 8 months ago. With that said, a correction usually feels a lot worse than it is. It also often brings out the ghosts of 2008 or 2000. “I don’t want another 2008!!!” is a common chorus we hear. Corrections also tend to last around 64 days on average.

A couple of things we want to point out.  

  1. We feel your pain, this isn’t fun, and nobody likes seeing hard earned money/gains go down.
  2. If people sold every time, we had a correction, they more than likely would never have any gains in a portfolio.  
  3. Markets typically have swings of at least 10% a year and are positive 7 out of 10 years on average. That means 70% of the time, you make money in stocks.
  4. We often hear “I would love to own this or that if it was just 10% cheaper.” Well, what are you waiting for?

We feel this correction may feel worse than usual for a few non-fundamental reasons. One being the imaginary time frame called a calendar. When a correction happens early in the year, people feel like they have all year to come back. When it happens in the later part of the year, they feel they can’t make it back by the end of the year. This is somewhat silly. Although we like to “keep score” on an annual basis, investors time horizon should extend beyond the period it takes for a trip around the sun.

One of the table stakes of the way we try to manage money is to attempt to evaluate the level of risk someone is willing to take and then we use various math-based models to attempt to reduce the potential for catastrophic loss. It’s not emotional, it doesn’t care how we feel, it’s based on the numbers. If we continue to decline based on momentum, we will continue to remove risk and raise capital. Fundamentals are good right now for most companies and for our Country. Unemployment is low, wages are rising, earnings are good, and inflation is stable. This is not 2008. If we saw declining fundamentals paired with a drop in the market, we would be more concerned. We, like you, are frustrated. The poor stuffed bear on my desk has been brutalized the last month. However, we see better days ahead and have several potential catalysts that could turn this around with no notice. Stay the course and have faith in your investment and financial plan. If something has changed in your situation that dictates a change, please let us know so we can make adjustments. Otherwise, try to tune out the noise and enjoy your family and friends and the good in your life this holiday season and every day.

All the best,
Evan and Dale

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