Message from Jon
With the year-end approaching quickly, the overall expectation of the "Santa Claus Rally" that once was a staple of investor psyche is now all but expired for the year. With 8 trading days left and the market's conditions continuing to deteriorate, even with a late rally, it may simply not be enough to turn the tide of pessimism that currently resides in the minds and hearts of investors.
Reading through my weekend list of newsletters, articles, and topics of interest, there was a bevy of material with a pessimistic slant to it.
According to the University of Michigan study "Stock Market Extremes and Portfolio Performance," out of the 31 years from 1963 - 1993, just 90 days made up 95% of market gains. This averages out to 3 days per year making up 95% of gains.1 This definitely puts into perspective some of the frustration investors are feeling as of late.
While I have been speaking with clients, I have said numerous times that I am expecting a down-turn that is possibly the worst ever beginning around 2020-2022 for many reasons. Today was the first article I have seen come out with a similar stance to it talking about a recession probability around 2020-ish.2
One of the best articles I came across demonstrating and articulating how a bear market works was by David Haviland of Beaumont Capital Management titled "Anatomy of a Bear Market," where he describes 13 bear markets since WWII, how long they last, and how far they drop.3 This is really interesting material that helps to visualize a bear market (which I believe we are already in at the beginning stages) and what, if we are accurate, we can come to expect in the near future.
As I have said prior, we have already reduced risk levels for clients and continue to monitor and make changes as the market conditions warrant.
Till we speak again, I hope you get all of your Christmas Prep finished!
- Stock Market U of M PDF
Stocks Down, Change Ahead?
WEEKLY UPDATE - DECEMBER 17, 2018