Market Overview
Just three weeks ago, the US stock market suffered its worst weekly decline in two years. This was immediately followed by the S&P 500’s best week in over five years. This week, we experienced a choppy market where the
Nasdaq Composite notched its longest losing streak since 2016
.
Volatility has returned after more than a year as illustrated by the CBOE Volatility Index (VIX) which continues to hover around 20, roughly twice its rate from the beginning of the year. In my opinion, riding out the volatility and ignoring the short-term noise is usually the best option for long term investors with appropriately diversified portfolios.
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With large drawdowns in the market, it often provides unique buying opportunities which we monitor closely.
The First Stock Market Correction in
Two Years
The stock market correction of February is the first since early 2016. Already, analysts are quickly trying to figure out what exactly this means for the market in 2018. Some are predicting doom and gloom, as is former Reagan Economic Advisor, Martin Feldstein, who believes the
stock market could drop by a third
. Others are marking this as a buying opportunity. No matter what side you fall on, we believe that perfectly timing the market is essentially impossible and that the best strategy to ride out market volatility is to properly diversify in a way that helps you grow your assets to meet your short-term and long-term goals.
The Great Migration
It is estimated that tens of trillions of dollars of wealth will be passed from the Baby Boomer generation to younger generations these next few decades. How should you speak to your family about this? Often, people believe that less is more with these conversations. In other words, do not reveal your balance sheet to your children. Most professionals agree that you should not disclose everything to your children, but a conversation beginning in their teenage years that lays the groundwork should happen. You must find that fine line between educating your children at each stage in life but not creating a dependency on inherited wealth. This month’s
WSJ Wealth Management Journal Report
provides a good framework on how to approach this topic.
Despite what you may think, the world is progressing
In a recent
Saturday’s WSJ Essay
, Harvard Professor Steven Pinker explains how human progress continues, despite what we may hear from political pundits on both sides. According to the article, the world is about a hundred times wealthier today than it was two centuries ago, and poverty could approach zero within our lifetime. Pollution is down and literacy is up. Homicide rates are near all-time lows and the proportion of people killed annually in wars is about a quarter of what it was in the mid-1980s and a 16
th
of what it was in the early 1950s. People are getting healthier, richer, safer, smarter, and freer by almost all measurable statistics. It is sometimes a good habit to take a step back and to look at some of these macro statistics when you find yourself pessimistic about the future.
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investors should consult with their trusted advisor(s) about their particular circumstances
