Well THAT got interesting pretty quickly (referring to all of the world’s stock markets). Fortunately for our investors, most of our strategies were set to a reduced-risk stance before the current drop occurred.
If you were to listen to the media, you’d think we have already lost 50% of market value after Friday’s drop, but the reality is the S&P 500 is only down 4-5% from the beginning of the year. To put things into perspective, here is a chart of the past twelve years. The Great Recession of 2008-2009 appears toward the middle. At the top right, the Red and Blue lines show the range of this year, with the Blue line being the starting point.
The Chart is the Monthly S&P 500 From August 1, 2003 to August 21, 2015
You can see why, in light of the current year’s movement, last week’s drop feels pretty dramatic; but over a broader perspective, we feel we aren’t aboard a sinking ship just yet.
In the past four years, we’ve seen this similar scenario three other times, and each time it resulted in a continuation move higher* in the overall markets. If the market can rebound quickly, that will likely be the case here today as well.
Interestingly, Precious Metals (gold and silver) haven’t been much protection in this past week (as they are often touted to be). Money seems to be flowing to one place, and that is the bond market. That means the bond market is improving. Even so, the overall bias is still negative. We are still watching interest rates and are looking for the posibillity of eventually using investments that profit from rising rates. But we’re not quite there yet. We don’t think it likely that the Federal Reserve will raise interest rates this year. (If they would be brave enough to just come out and say that to the public, we also think the market tone would change.)
Finally, there has been much talk and speculation about how bad this upcoming September/October is supposed to be. As you know, we are always on the lookout for “major storms” so that we can help provide protection for our investors. The way everything looks right now, we don’t feel “impending doom” has been confirmed, but if this market sentiment (buyers vs sellers) continutes, then of course we’ll take action.
*Past performance does not indicate future returns.