Message from Jon
This current market condition should not have caught any one of my readers off guard, or at the very least, surprised anyone, since I have been speaking about and warning that the market conditions of 2018 would not look anything like 2017, and that IF we turn out a 4-6% return by year's end, I would consider it a home run.
Here we sit with less than 6 weeks left in the year, and the DOW is at 24,574 (down from 26,951), the S&P 500 is at 2,674 (down from 2,939), and the NASDAQ is at 7,089 (down from 8,133). 1 We have tariff headwinds, geopolitical headwinds, and FED raising rates-to name but a few obstacles that will likely prove quite difficult to maneuver around. 2
We are fortunate enough to have reallocated client accounts to reduced measures of risk several weeks ago and will continue to remain diligent on a daily basis, searching the horizon for both risks to be avoided and potential rewards to be seized.
Yesterday, we had a bounce higher that felt like a bear market trap kind of day, since there was nothing released in the way of any news that warranted the bounce upward. An official bear market condition in an investment is when the investment declines more than 20% from its high. 4 If this happens across a broader section of the market, say an index or sector(s), then we have a bear market condition.
Bear Markets are simply a different kind of investing atmosphere to be navigated, not avoided. In the collective memory of investors, I sometimes feel like a bear market condition is met with a mad rush to cash in order to avoid what is thought to be an oncoming crash. This type of severe market behavior is incorrect. Not every bear market results in a crash. It would be similar to driving 5-10 mph with the blinkers on every time it snowed! This kind of approach would cause more damage than safety to be sure.
Bear markets are choppy, underperforming, and often accompanied by a myriad of factors. As a result, investors should shift their investing approach from growth and gains by way of equities to income and protection by way of bonds, alternatives, and dividend paying investments. According to Crestmont Research, we have been in a secular bear market since 2000 and are likely to remain there until the overall valuations of companies retreat back toward their mean average. 3
With all this said, are we officially in a bear market condition at present? No, just a choppy, volatile, and messy one at the moment.
Till we speak again, enjoy your winter flurries!
Why Did Stocks Drop?
Weekly Update - November 26, 2018