Market Insights: Acumen’s Commentary on Recent Market Volatility as of 10.10.18October 11, 2018
The headline in the Washington Post on October 10, 2018 reads “U.S. markets drop sharply as investors are spooked by rising rates”. When seeing large point movements in the market indices, remember it is important to think in percentages rather than points. The 832-point drop is a 3.15% decline in the Dow. The Dow’s biggest one-day percentage loss was the 22.6% Black Monday crash on October 19, 1987. In point terms, that was “only” 508 points. In second place, the Dow fell 12.8% on October 28, 1929. The blue-chip index retreated just 38 points that day.
In the short term, the market is driven by greed and fear. Today, fear took the wheel. Fueling the drive lower are fears regarding rising rates and trade tensions. It is true the Federal Reserve has been and will continue to raise interest rates. This action has been highly anticipated for years and can slow inflation and return interest rates to a more normal rate. The timing of the increases is occurring because the fundamentals are strong. The economy, as measured by GDP, continues to grow. We remain in a manufacturing expansion as demonstrated by the Institute for Supply Management. Unemployment remains low. Inflation has been tame. Corporate tax cuts and moderate wage growth have been beneficial for profits and earnings growth.
If you have been waiting for a market pullback to add money to your portfolio, your wait may be over. Indicators like CNN’s Fear & Greed Index (8 out of 100) are now showing extreme fear meaning the average investor is afraid and seeking safety. We cannot call the bottom of this pullback, but the valuations are more attractive now than they were at the beginning of the year.
In volatile times it is important to remember, diversification is your best line of defense. The Acumen Wealth Advisors investment portfolios are diversified across assets, asset classes, asset styles, and market capitalization.
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The opinions expressed in this commentary should not be considered as fact.Information contained herein is not and should not be construed as an offer, solicitation, or recommendation to buy or sell securities. The information has been obtained from sources we believe to be reliable; however no guarantee is made or implied with respect to its accuracy, timeliness, or completeness. It is suggested that you consult your financial professional, attorney, or tax advisor with regard to your individual situation. Comments concerning the past performance are not intended to be forward looking and should not be viewed as an indication of future results. Diversification does not protect against loss of principal.
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