The stock market rebounded in January, nearly erasing the losses of December 2018. Is the correction over, or will the market “retest” and drop lower again?
In this two-minute video, Ron Rough, FSA’s Director of Portfolio Management, provides some insight into what the market landscape has looked like and how FSA plans to approach the next few weeks.
Hello, this is Ron Rough, Director of Portfolio Management with Financial Services Advisory with a video market update for February.
Here’s a ball. You drop a ball from a high distance, what does it do? It rebounds. That’s exactly what we saw in the stock market in January.
Stocks sold off about 9% in December, and then we had a bounce back of about 8% in January. If we look at the chart here, you can see all we’ve done is recoup the loss from December to January. We’re still a little bit behind the break-even point at the end of November. So all we’ve done is have a big drop and a big rebound.
As our clients know, we had very high cash positions coming into December, and so the accounts did not fall very much. We also weren’t very invested in January, so the accounts did not rise very much in January, but we’re both in the same place.
The S&P 500 is down just under 2% over that two-month window. Our accounts are, on average, down about 1% over that two month period.
Now, of course, the question is, we’ve had this rebound, what comes next? Historically the pattern is, after a big selloff, there is often a retest of the lows. And that’s what we were expecting coming into February. However, the stronger the market recovers, the lower the odds are that we will have that retest.
So what we’ve been doing in the accounts beginning in mid-January, at the point where we were crossing above this 50-day moving average line here marked in purple, we’ve started to move the accounts back into the market.
I think it’s a little early to declare the correction period over, and it’s off to the races, but we’ll let the market action determine what we do. If the market continues to recover, you’ll see the accounts continue to come back into the market.
But we’re also very sensitive that we could still get a retest in the second half of February, into March, and we want to make sure that we have some powder dry for that possibility.
So until our next update, thank you for watching!
To view our disclosures, including our disclosure brochure, please visit www.FSAinvest.com/disclosures.