I included one simple paragraph at the end of last month\u2019s newsletter. \u201cBy month\u2019s end, a modest bout of volatility re-entered the landscape, as investors took note of an upward creep in Treasury bond yields. It\u2019s a reminder that stocks don\u2019t rise in a straight line.\u201d<\/p>\n
While tranquil periods won\u2019t last forever, I will never try to time a peak or trough in the market. Corrections can come suddenly, surprising the most astute market observers. <\/p>\n
There is no one out there that can consistently call the tops and bottoms in the market, period. <\/p>\n
A sudden downdraft in shares can be unsettling for some. I understand that. I\u2019ve heard a correction described as being blindfolded on a rollercoaster. You know there\u2019s a bottom – you just can\u2019t see it. <\/p>\n
Early February\u2019s slide saw the S&P 500 Index lose just over 10 percent in value \u2013 an official correction \u2013 in just nine trading days. That\u2019s right – nine trading days from an all-time high to a 10 percent decline, which was the quickest on record. <\/p>\n
Let\u2019s review the landscape. Moderate economic growth at home and abroad has been fueling corporate profits; analysts have been sharply revising 2018 profit estimates higher (Thomson Reuters); inflation has been low, and interest rates, while creeping upward, remain near historically low levels. <\/p>\n
It created an ideal environment for stocks, i.e., low volatility and upward momentum. <\/p>\n
However, when you\u2019re priced for perfection, or something near perfection, any disappointments are likely to be amplified. <\/p>\n
What sparked the sell-off? Yields on the 10-year Treasury were rising, which began to create a stiffer headwind for stocks. <\/p>\n
But what likely would just have been a mild downturn, snowballed. As we entered February, speculators who had piled into products designed to take advantage of low volatility were suddenly forced to jump ship, which exacerbated selling pressure in stocks. <\/p>\n
Further, computer program trading kicked in, adding to the turbulence. <\/p>\n
Let me take a moment to repeat a familiar refrain. Making investment decisions during times of emotional duress is rarely profitable. <\/p>\n
Walt Bettinger, CEO of Charles Schwab, summed it up well in a timely interview at the end of last year that was published in Fortune <\/i>and picked up by Money<\/i>. <\/p>\n
\u201cWe don\u2019t believe it\u2019s possible for people at scale to beat the market and predict the market and know when to get in and out of the market,\u201d Bettinger said. \u201cWhere most individual investors get in trouble is when the market goes down and they can\u2019t stand the pain so they leave. Then they either don\u2019t get back in or they wait until the market is turned and gone way up and then get back in. That\u2019s what really crushes individual investors.\u201d<\/p>\n
We\u2019ve experienced periods that might be described as modestly \u201cpainful\u201d since 2010. Admittedly, the 2001 and 2008 bear markets were difficult, but even investors that were fully invested in stocks \u2013 something I rarely recommend \u2013 were made whole and then some if they didn\u2019t sell out at or near the bottom. <\/p>\n
Bottom line <\/b><\/p>\n
The early February downturn can be pinned on technical factors and not economic distress, in my view. The profit and economic outlook is upbeat, which I believe cushioned the downturn. <\/p>\n
Interest rates, however, may tick higher. It\u2019s something that could create headwinds in the nearer term, even as profit growth this year is forecast to accelerate (Thomson Reuters). Longer term, I am confident in the economic outlook. <\/p>\n
I hope you have found this review to be educational and helpful. If you have any concerns or questions, let\u2019s talk. That\u2019s what I\u2019m here for. <\/p>\n
As always, I am honored and humbled that you have given me the opportunity to serve as your financial advisor. With the Super Bowl in the rear view mirror, we turn to golf and great results from our beloved Yankees.<\/p>\n
Greg Burns is owner and financial advisor at Entrust Wealth Management, located at 35 Lake St. in Owego. He can be reached by calling (607) 223-4024, by email to gburns@cantella.com<\/a>, or you can visit www.entrustwealthmanagement.com<\/a> to learn more. <\/i><\/b><\/p>\n","protected":false},"excerpt":{"rendered":" I included one simple paragraph at the end of last month\u2019s newsletter. \u201cBy month\u2019s end, a modest bout of volatility re-entered the landscape, as investors…<\/p>\n","protected":false},"author":5,"featured_media":64117,"comment_status":"open","ping_status":"open","sticky":false,"template":"","format":"standard","meta":{"ngg_post_thumbnail":0,"footnotes":""},"categories":[1],"tags":[],"class_list":["post-64116","post","type-post","status-publish","format-standard","has-post-thumbnail","hentry","category-editorial"],"yoast_head":"\n