The past few days have certainly been a wild ride in the markets. Since January 26th, the Dow Jones Industrial Average has shed 2114 points as of Wednesday, February 7th. This includes Monday’s free fall which saw the index drop 1175 points. While these certainly are large and scary numbers, the sell-off equates to a decline of 7.94%. If you want to stop reading here (I certainly understand if you do), just know declines such as this are completely normal and there is no reason to worry. Despite the attention-grabbing click-bait headlines, what we are experiencing is a part of a healthy expansionary market. Last year’s calm market was the true anomaly.
Over the past 37 years, the market usually sheds, on average, 14% at some point during the year. Last year’s largest peak to trough decline was only 3%. That’s only the second time in those 37 years it’s happened. It seems some people who write for national news publications forgot markets don’t only go up.
For us, the bottom line is our economy is healthy and there are no red flags indicating this expansionary period is at risk of ending. Market ups and downs are perfectly normal, and we see no reason this sell-off will turn into any sort of major market melt-down.
While there will certainly be some anxious moments in the days to come, please keep in mind we have been expecting volatility to return to the markets. We talked about this at length in both our 2017 Year End Wrap Up and our 2018 Projections, which can be found on our website. When we designed your portfolio, we knew there would be periods like this and even worse. The best path to achieving your goals remains to have a diversified portfolio of investments. Turn off the TV and ignore the sensational headlines; the media’s goal is to grab your attention, not to inform you.
We are here if you want to discuss these events or if you are feeling anxious about how all this impacts your goals. We encourage you to contact your advisor if you have any questions.
Your Team at EBW
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