The U.S. stock market at this early point in the year is down (biggest Jan. sale ever?) more than any other year in history.
What does that mean to you?
- Opportunity – what a great sale! I never thought I would be able to buy in again with the Dow in the 1,600’s. or 1,500’s. The Dow is roughly down 8% in 2016. Oil is at a 12 year low and China’s stock market down roughly 15% already in 2016.
- The beginning of the end for stocks. Prices may go down a lot further….scary. Expect the media to go for ratings by predicting doom and gloom.
- No big deal- seen it before volatility doesn’t bother me
The headlines have been brutal in 2016: stocks getting whacked (DOW hit same low point as it did in August, 2015), oil plummeting, bank, energy, retail and technology companies stocks are doing especially poor. Despite all this, I have not received any panic calls or emails. As a matter of fact, one client actually just made a significant addition to her portfolio as she wanted to take advantage of the low prices!
I must say I am proud of my client’s reaction during this difficult time. Maybe it’s because they have lived through this several times before. Bonds are an asset class that is doing well right now and should cushion the stock fall to some degree. I’m hoping my client’s comfort is because they are comfortable with their investment and financial plan and are OK with riding this out. I have not been very comfortable with much of what is going on with our economy and we may be going from an slow economy to a recession. Either way, we will pull out of it eventually.
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It wouldn’t shock me if there were more losses in stocks, nor will it shock me if/when they bounce back. I tend to be a contrarian and like the idea of “buying when there is blood in the streets” and people want to give away good companies at seriously marked down prices. No one rings a bell when we hit the bottom or the top which is why an investment strategy that is in align with your specific goals is the way to go.
Oil is at $29 a barrel today, down from around $60 a barrel one year ago. Is the question IF or WHEN will oil be at $60 again or WHEN? I tend to think “when”.
The Bearish Argument
“The bearish argument is always most compelling on the lows.” Stated another way, the bearish argument sounds the smartest. Recently, the commodity bears sound pretty smart. They are right! Great.
When the turn happens, they will be wrong.
In other words, there is zero probability they will suddenly just have a change of heart and get bullish on commodities right on the lows. So it is hard to use these folks as a coincident indicator. But when the volume of these arguments pick up, it’s time to pay attention.
I could find half a dozen people to argue with me why commodities should be even lower. Or zero, or negative. It would be a compelling argument. Because the bearish argument is most compelling at the lows. At the lows, the bullish argument is totally nonsensical. But often right.
Let’s not try and time any market, but rather have a solid plan and stick with it. As always if you are concerned with the volatility in your portfolio or would like to revisit your plans, feel free to contact me.
Also, I have a new primer for non-clients that would like to get a snapshot of their financial plan for Free.
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