Winter Storm Hits Markets

rockville financial investment planning

Winter Storm Hits Markets

Stocks have made an abrupt about-face in the early days of February after marching steadily higher in January, a continuation of the bull market party in place since the election in late 2016. The declines in global markets have wiped out the gains from January and then some. The fireworks have been a stark reminder that stocks don’t always go up—and when they go down, they often go down quickly. Including Friday’s late-day rally, stocks are down over 8% from the highs hit on January 26.

Corrections are actually quite common. According to the historians, we should expect a 10% correction at least once a year. Amazingly, we did not even have a 5% correction last year. As a result, many investors had become quite complacent. Investors had become so used to smooth upward trending stock prices; any correction was certain to feel more gut-wrenching.

Despite the incredible volatility of the past week, this correction has, so far, been in line with recent corrections. Below, I list the three most recent corrections along with the amount of time to hit the first significant low:

07/21/11 – 08/08/11 -18% 3 weeks
08/17/15 – 08/25/15 – 9% 1 week
12/29/15 – 01/20/16 -10% 3 weeks

As we have reported in recent Interim Market Updates, we have been building up our cash allocation as stocks have fallen. As our holdings trip through their exit points, we sell them. The table below shows our current equity percentages as we head into the weekend. If weakness continues into next week, those equity percentages will drop to zero, but if stocks can mount a recovery, we will be looking to add to those positions. In our experience, though, after this type of volatility, it usually takes a while before markets calm down and begin to move higher again.

We thank you for your patience during this challenging time in the markets. Please call or email us if you have specific questions for us.

Ronald Rough, CFA
Director of Portfolio Management

 

 

Disclosures: Please remember that past performance may not be indicative of future results. Different types of investments involve varying degrees of risk, and there can be no assurance that the future performance of any specific investment, investment strategy, or product (including the investments and/or investment strategies recommended or undertaken by Financial Services Advisory, or any non-investment related content, made reference to directly or indirectly in this newsletter) will be profitable, equal any corresponding indicated historical performance level(s), be suitable for your portfolio or individual situation or prove successful. Due to various factors, including changing market conditions or applicable laws, the content may no longer be reflective of current opinions or positions. The FSA Safety Net® is designed to represent an exit point for each security within a portfolio and to help reduce losses from sustained drops in the financial markets.

The FSA Safety Net® is not effective and will not protect assets in abrupt/sudden market drops. Examples of such occurrences include, but are not limited to, the market crash of October 1987, the market drop in October 1989, the market disruption caused by the terrorist attacks of September 2001, and the flash crash of May 2010. Similar future occurrences could reduce the effectiveness of the FSA Safety Net®. In addition, the FSA Safety Net® will not protect assets in the event mutual fund companies, custodial companies, or the securities exchanges themselves, at their discretion, suspend, disallow, or fail to conduct trades, redemptions, or liquidations. Moreover, you should not assume that any discussion or information contained in this newsletter serves as the receipt of, or as a substitute for, personalized investment advice from FSA.

Financial Services Advisory is neither a law firm, accounting firm nor insurance agency and no portion of this newsletter should be construed as legal, tax, insurance or accounting advice. FSA advisors are not attorneys, accountants, insurance agents or comprehensive financial planners and no portion of its services should be construed as legal, accounting, insurance, or tax advice. For further details, including FSA’s current Disclosure Brochure discussing our advisory services and fees, please see important disclosures at www.FSAinvest.com/disclosure. The scope of the services to be provided depends upon the needs of the client and the terms of the engagement. Please remember that it remains your responsibility to advise FSA, in writing, if there are any changes in your personal/financial situation or investment objectives for the purpose of reviewing/evaluating/revising our previous recommendations and/or services, or if you would like to impose, add, or to modify any reasonable restrictions to our investment advisory services.

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Kim D

For over three decades, Financial Services Advisory has helped clients manage their money through good times and bad. We customize an individualized approach for every client looking to invest while focusing on protecting what you have worked so hard to create. When working with FSA, you will find our goal in managing investments to help you protect your wealth while growing it wisely.

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