I know all of you are tired of hearing that this market correction is due to the geopolitical issues around China and trade, interest rate concerns with an anticipated slowdown in the economy for the future, and most recently a US government shut down. However, to put this recent decline in historical perspective the average intra-year decline from peak to trough is about 14.2% over the last 35 years. Corrections are expected, normal, and even healthy. That statement may feel like cold comfort while in the midst of one, but we have been in a bull market for over 8 years before this correction. It reminds us how difficult it is to time the market and how important it is to be diversified and understand the liquidity needs of each of our clients.
I Cautioned in October
As mentioned in an email to all of my clients in the beginning of October, we were cautious and due for a correction. This decline was primarily driven by the uncertainty around tariffs, the Fed rate hike as well as weaker than expected economic growth in China. As stated in October for all of our clients we are well diversified and our portfolios have not felt the full brunt of the selloff. However, with that people should still be concerned and cautious.
Prepare For The Coming Year
I would like to reiterate that apart from the cash flow that you know of in each of your portfolios, if you do have a need for additional cash within the next twelve to eighteen months you should have your financial advisor hold this amount in a money market account. Many of my clients have taken advantage of raising cash before the sell off for the additional cash needs. The only thing certain we can predict is uncertainty and therefore, if you have a need for a large cash expenditure in the next twelve to eighteen months let your financial advisor know.
In times of heightened volatility it is important to keep in mind the following:
- Stay focused on your long-term objectives.
- Daily fluctuations will be smoothed out over time.
- Diversification is the key to superior risk-adjusted returns. While high-quality bonds have not kept up with the returns of the stock markets over the last few years they are an integral component in your portfolio because they provide protection against market declines. They have not only retained principal but they have earned a positive return over the last few weeks.
- The U.S. economy is still expanding, driven by strong job growth and positive earnings from corporations.
Contact Your Financial Advisor
Make sure your financial advisor is continually monitoring your portfolio and confident that you are positioned well in terms of allocation and quality. Don’t hesitate to let your financial advisor know if you have any questions or concerns.
We wish you a very Happy Holiday season and a peaceful and prosperous New Year.
All the best,
Andersen Tax LLC
125 High Street, 16th Floor Oliver St Tower, Boston, MA 02110
(Tel) 617-292-8402, (EFax) 617-517-7502