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The FMI Market Commentary is intended to deliver advice and insights centered around our economy, markets, and investment issues at this time. It is our goal to bring you timely and valuable ideas, updates, concepts, and strategies to help you in your quest for financial security and independence. Please feel free to contact us regarding questions you have or the specific application to your situation.
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-Financial Management, Inc.
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Happy New Year! We have seen a lot of volatility over the past month on the financial markets and the point swings continue to be unsettling. After climbs and falls of hundreds of points over days, one is left with fear and trepidation as the unaware investor may feel the sky is falling or is the end near? We tend to go back to our recent "bad memory/loss" in our investments and for many that takes us back to 2008 and 2009 when the financial markets lost over 50%. It is easy to forget that the bottom on March 9, 2009 left the S&P 500 at under 700 and the DJIA at 6507. The Dow Jones Industrial Average has climbed to more than 4 times that number over the past 10 years and we have the longest recorded bull "rising" stock market in history. Yes, we have seen speed-bumps and drops in the market along the way, but the normal drops in the market that happen routinely have been less than routine with the recent bull market. Thus, we are overdue this kind of volatility, that may continue for some time. We are certainly not waiting for the "end of modern economics and civilization" as the media would like you to believe.
In light of this volatility, we wanted to share a few perspectives and thoughts with you:
First, it can be tempting to "sit on the sidelines" and "wait it out". There are many inherent problems with this way of thinking though. First, the biggest increases in the market often follow the biggest declines in the market. This is illustrated well in the first attachment to this email entitled
Here's the Prescription(see top of page 2) compliments of David Jones from Dimensional. And, barring the ability to see into the future and avoid the decline in the first place, this type of strategy simply becomes a method of emotionally responding to past events while likely missing the opportunity to participate in the recovery.
Second, this is normal. The second attachment entitled
A History of Market Corrections from First Trust, illustrates this well. A market declines similar to what we have seen since October happens an average of once every 1.5 years and lasts for an average of 110 days. Since the peak of the market on September 20 (97 days ago) we have seen a drop of 19.77% in the S&P 500.
Third, as we manage your money, we are always keeping in mind that this is normal.
We plan for this to happen. This point is well illustrated in the third attachment to this email entitled
Staying the Course compliments of First Trust and Bloomberg, that shows prevalence of intra-year drops in the market along with the overall calendar year returns. Normal market events such as these should not affect your long-term financial well-being. In fact, if we've planned well, you won't notice market turbulence like this in your day-to-day life at all.
Fourth, I am here as your personal financial planner and advisor. If you want to chat about your situation, please let me know by responding to this email or calling me. I am always here to talk through any concerns that you have, but I want you to know that we are not overly concerned and have expected and awaiting some of this to happen.
Sincerely,
Content in this material is for general information only and not intended to provide specific advice or recommendations for any individual. All indices are unmanaged and may not be invested into directly. The economic forecasts set forth in this material may not develop as predicted and no strategy assure success or protects against loss, investing involves risk including loss of principal.
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About Financial Management Inc.
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Selecting a financial advisor is one of the most important financial decisions you will ever make. I have included information on the characteristics of highly qualified financial professionals for better clarity. Working with an independent financial advisor who has experience and education backed by professional credentials such as CFP®, ChFC, MBA, or RFC® that they work on a "fee" basis to offer you objective advice.
A "fee-based" advisor works in your best interest because the value of your account affects their compensation.
A credentialed advisor is bound by a "Code of Ethics" and is trained in risk management, investment analysis and allocation, retirement and estate planning, cash flow and debt management, as well as tax issues. The difference is knowledge and expertise to understand how doing something in one part of your financial world, impacts another. This gives you the advantage of comprehensive integration of all your financial information.
Registered investment advisors are registered with their state or the Securities Exchange Commission (SEC).
A registered investment advisor is required by law to provide full disclosure of compensation, education, history of complaints, and conflicts of interest.
All this provides you with comfort of knowing that Financial Management, Inc....Our Solution!
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YAKIMA OFFICE:
115 N 50th Ave
Suite B
Yakima, WA 98908
Phone: (509) 965-5654
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KENNEWICK OFFICE:
7025 W Grandridge Blvd
Suite B
Kennewick, WA 99336
Phone: (509) 735-7526
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SPOKANE OFFICE:
221 West Main Ave
Suite 200
Spokane, WA 99201
Phone: (509) 443-5174
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WENATCHEE OFFICE:
25 N. Wenatchee Ave
#205
Wenatchee, WA 98801
Phone: (509) 888-9499
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Securities offered through LPL Financial, member FINRA/SIPC, A Registered Investment Advisor. Investment advice and financial planning offered through Financial Management Inc., A Registered Investment Advisor and separate entity from LPL Financial.
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