Greetings! I trust that this finds you well and enjoying life.
After a tumultuous volatile week technically a week that involved the greatest market point fluctuations (not percentage fluctuation) ever, where will it go from here? Officially we experienced a cyclical (short term) not secular (long term) market correction. A correction is a decline of 10% or greater. A bear market is a decline of 20% or greater. At one point the Dow was down 14%. So we definitely experienced a correction, however quite a bit of recovery has occurred by close of market Thursday.
For all practical purposes it appears as if China and their eratic economic policies was the straw that broke the camel’s back. I say that because our markets had been uncertain and perhaps over priced for a number of months. China tipped the scale for our markets and a number of other developing markets as well. One glaring reminder and truth from last week is that we operate under such a global economy now and economic events elsewhere in the world, affect the entire globe much more than they did twenty or even ten years ago. This trend will only continue to develop and influence us in ever increasing ways.
The US has a lot going for it economically that should bode well for us in the near term. Although slow to transpire, we are well established in our recovery from the “great recession”. Unemployment is nearing normal, wage growth is improving, energy cost are historically low with no increase on the horizon and corporate earnings are favorable for the most part. China’s break neck economy is slowing, however only 2.5% of our GDP depends on China. So their slow down shouldn’t effect us that much (as it will developing economies). Should the FED tighten money policy by raising rates this year (and many believe they won’t), it will send a signal to the world about our economic strength. Cyclically America is in a favorable position, compared to most developed economies. Obviously none of us one know for sure what the future holds, but in many respects things could be a lot more uncertain than they are or even were two weeks ago.
Still the volatility and uncertainty accompanying it is uncomfortable isn’t it? What can you do about it, how do you manage it? Disciplines of financial planning encourage us to have a comprehensive plan for managing your assets that matches your unique investor profile, objectives, situation and stick to it. Of course we need to monitor and adapt as circumstances change, at the appropriate time and in the proper mindset. Act rather than react so to speak.
If you have questions about your financial plan or feel that we can help in any way don’t hesitate to call.
Jeff Christian CFP, CRPC