If you have been watching the news you may think the world is coming to an end. Is everything spinning out of control: Deficit budgets, trade wars, China, Russia, Iran, North Korea? Also, it doesn’t help that the numbers are so large. We see headlines of -700 points and -400 points along with words like plunge, plummet and crater, which can cause investor unrest when mixed with the drama in Washington. Are we doomed? Hardly. At least no more than usual, but our media often blows things out of proportion, primarily to attract viewers. We urge everyone to keep things in perspective.
The stock market established new all-time high on the Dow Jones Industrial Average two months ago on January 26th. Since then the index established a recent low on February 8th when it declined about 10.4%. Last Friday the Dow dropped to an even lower low, down 11.6% from January’s all-time high.
To keep things in perspective, according to Capital Research and Management Company since 1900 there have been corrections of 10% or more about once a year. This equates to about once a year lasting an average of 115 days. The last correction was in August of 2015, so it may have been overdue.
It’s always possible to slip into a bear market but the strong economy and rising earnings make that seem doubtful. Again, we urge you to keep things in perspective.
Thank you for your business and referrals and we hope to see many of you at the baseball game April 22nd.