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The Northern Star 1/2/19 Turbulence Continues

Message from Jon

Merry Christmas & Happy Holidays to each of you! I hope that you had time with your loved ones.

We will be closed for New Years on the 31st and 1st.

Market Update:

The markets on the other hand extended their sell off into Christmas Eve down more than 600 points. According to Kate Rooney at CNBC, we are officially in a bear market for the S&P 500 which should not be much of a shocker to anyone of you by now when reading any of my recent newsletters. 1

 We have been moving money to higher ground since October and grateful we did so.

Here are some notes for when the concerns, headlines, stress and hyperventilation starts to creep in.

  • 2008-2009 was a S&P 500 decline of approximately 54% 2
    • It recovered in 4 yrs! 3

      • Worst decline since the great depression and the recovery was less than the terms of a car loan!
  • If you decline 10% then it requires a 12.3% gain to get back to break even
    • We have made those gains from Jan to Oct. of 2017 (9 months) 4
  • If you decline 20% then it requires a 25.2% gain to get back to break even
    • We have made those gains from Dec 2016 to Jan 2018 (13 months) 5

I say this to remind you to remain calm. The headlines will get worse before they get better, remain calm. Accounts will drop but they will also recover, stay calm. This period will pass and all will return to normal in the kingdom. Don't let your emotions get the best of you because you may end up making decisions that you later come to regret. 

Till we speak again, have a Safe and Enjoyable New Years!



  1. https://finance.yahoo.com/news/now-bear-market-apos-means-180900089.html
  2. https://en.wikipedia.org/wiki/United_States_bear_market_of_2007%E2%80%9309
  3. https://www.reuters.com/article/us-usa-stocks-sp-timeline-idUSBRE9450WL20130506
  4. https://finance.yahoo.com/quote/%5EGSPC/history?p=%5EGSPC
  5. https://finance.yahoo.com/quote/%5EGSPC/history?period1=1482728400&period2=1517202000&interval=1wk&filter=history&frequency=1wk

Turbulence Continues


Last week, domestic markets had some of their worst performance in 10 years.[1] The S&P 500 lost 7.05%, the Dow declined 6.87%, and the NASDAQ dropped 8.36%. All three indexes have now lost at least 8% in 2018.[2] On Friday, December 21, the NASDAQ entered a bear market, which means it's at least 20% below its last record high. Meanwhile, the S&P 500 and Dow both finished the week close to bear markets, too.[3] Internationally, stocks in the MSCI EAFE also struggled, posting a 2.67% weekly loss.[4]

What happened to the markets?

Last week brought a number of economic updates, which gave mixed signals on the economy:

  • Consumer spending increased in November. 
  • Business spending slowed down. 
  • Economic growth in the 3rd quarter slightly missed projections.[5]

However, markets hardly focused on the data.[6] Instead, two key headlines drove the week's performance: 1) results from the Fed's latest meeting and 2) the risk of a government shutdown.[7]

Let's look a bit more into what happened - and how the markets reacted.

1. The Federal Reserve increased rates and shared its economic projections.

Markets expected the Fed's 4th interest rate increase for the year.[8] In many ways, traders were trying to read between the lines of every Fed announcement last week to see how sensitive the agency would be to the markets. As a result, investors became concerned about the Fed's statements that increases could continue in 2019, despite seeing a slowdown in economic growth. This reaction caused some of the sell-offs.[9]  

2. A government shutdown loomed - and then happened.

A disagreement between Congress and President Trump about government funding for a border wall continued throughout last week. While a deal had seemed imminent, by Friday afternoon, the political divide continued and a shutdown loomed. Stocks dropped significantly as a result. By Saturday morning, 9 of the 15 federal departments had closed due to the shutdown.[10]

What should you do?

These challenging moments are when keeping perspective is most important. Sell-offs and uncertainty can feel worrisome - and we cannot say for sure how long this market turbulence will continue. 

In the weeks ahead, the government shutdown may continue, and we may not experience the strong "Santa rally" that investors hoped for.[11] However, it's important to remember that, historically, shutdowns are short and don't typically create negative long-term effects on the economy.[12]

However, when thinking about the current environment, we want to encourage you to consider airline turbulence: During a flight, turbulence can feel unsettling and downright scary. But, you don't jump out of the plane just because it's shaking. While you may worry about a crash, the pilots are using every available data point, measurement, and expert to find the safest path to your destination. The unpleasantness almost always calms - and you arrive where you intended to go.

In this same manner, we're tracking this current turbulence and how it relates to you. No matter what lies ahead, we're here to pilot you through. If you want to discuss specifics about our economy, your goals, and current momentum, please contact us. We're always ready to help you understand your financial life.

Monday: NYSE Early Close
Tuesday: Markets Closed for Christmas Day
Thursday: New Home Sales, Consumer Confidence, Jobless Claims
Friday: Pending Home Sales Index

Notes: All index returns (except S&P 500) exclude reinvested dividends, and the 5-year and 10-year returns are annualized. The total returns for the S&P 500 assume reinvestment of dividends on the last day of the month. This may account for differences between the index returns published on Morningstar.com and the index returns published elsewhere. International performance is represented by the MSCI EAFE Index. Past performance is no guarantee of future results. Indices are unmanaged and cannot be invested into directly.


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