The S&P 500 entered into a technical correction last Friday.  The two major factors in focus are the slowdown in China and the potential U.S. interest rate hike.  A correction is defined as a 10% decline from the market high.  Corrections are extremely normal in the markets.  In fact, historically a correction has occurred approximately every 12 months, on average.  Looking back, the last correction in the US equity markets occurred in the summer of 2011.

To state that these movements are "normal" doesn't make them feel any better.  This particular correction has also happened in a very short time frame leading to extremely volatile days in the financial markets.   The questions that we are faced with now are two-fold: how far will it fall and what should you do about it?

No one has a crystal ball.  Our goal is to listen to what some of the largest institutional money managers believe.  These managers have very experienced teams of professionals, whom we communicate with on a regular basis.  We are conducting in-person meetings and conference calls, as well as keeping up on many of the recently released articles by these firms.  Although none of the groups are attempting to predict the bottom, it's important to state that not a single one we've met with believe it would be anywhere near the magnitude of the 2008 markets.  Many believe the correction will stay in the range of 10 to 20%.

We spend a significant amount of time discussing the appropriate asset allocation with clients.  Over the last couple of years, we've heard a lot of questions surrounding the idea of "why do I own bonds?"  Well, that time is now.  However, for those clients that have a long-term time horizon and wanted to add equity exposure, but didn't want to buy in with the Dow at 18,000+, this is an opportunity to buy into equities at a lower price.  It is impossible to know if the price could get a little better, but it is certainly better than it was a few months ago.

No matter what your situation, we are here to discuss your individual needs.  Thank you again for your trust in WWK and our staff.