Nov 6, 2018

FDP Special Market Commentary

Volatility has certainly returned to the financial markets this quarter!  Staying invested in a volatile market takes a certain amount of intestinal fortitude, but it’s not without reward.  The chart below demonstrates how difficult it is to time the market – you have to be right twice – when to sell out of the market and when to buy back in.

Returns of S&P 500

The penalty for guessing incorrectly is significant.  For example, the total return for the S&P 500 Index during the 20-year period of 1997-2016 was 7.68% annualized (per year average).  Missing the ten best performance days during that 20-year period reduced the annualized return to 4.00%, nearly half of the return per year wiped away because of just ten days over 20-years.

Many times, as was the case in August 2015, the best performing days are preceded by the worst performing days.  It is in these moments when disciplined investors are rewarded for staying the course while others find themselves on the wrong side of two significant events – deciding to sell right after the worst performing day and then deciding to buy back in after the best performing day.

During times of volatility, it is important to remember the basic principles of investing; constructing a long-term investment plan with an appropriate investment policy statement, proper asset allocation, diversification, and discipline.  As your advisor, our job is to remind you of these basic investment principles so that you stay the course and have the best opportunity to achieve your long-term financial goals.

Reproduction Prohibited without Express Permission. Copyright FDP Wealth Management. All rights reserved. Advisory Services offered through FDP Wealth Management, LLC, a state Registered Investment Adviser and Valmark Advisers, Inc. a SEC Registered Investment Advisor. Securities offered through ValMark Securities, Inc., Member FINRA/SIPC. 130 Springside Drive, Suite 300, Akron, OH 44333-2431 800.765.5201 Prosperity Partners and FDP Wealth Management, LLC are separate entities from ValMark Securities, Inc. and Valmark Advisers, Inc. Prosperity Partners, FDP Wealth Management, LLC, ValMark Securities, Inc., Valmark Advisers Inc., and their representatives do not offer tax advice. You should consult your tax professional regarding your individual circumstances. Indices are unmanaged and cannot be invested directly in. Past performance is not a guarantee of future results.

Indices are unmanaged and do not incur fees, one cannot directly invest in an index. You should consult your tax professional regarding your individual circumstances. This information is provided by Financial Jumble, LLC. Financial Jumble, LLC is a separate entity from ValMark Securities, Inc. and ValMark Advisers, Inc.

RELATED POSTS

Soft December Hiring Underscores Tepid Year

On Friday, the U.S. Bureau of Labor Statistics reported that nonfarm payrolls increased by 50,000 in December, underscoring a year of persistently sluggish job growth.

A Stock Market Three-Peat

The bull market that began in late 2022 continued through last year. The S&P 500 Index, which posted gains that topped 20% in both 2023 and 2024, recorded an advance of 16.39% last year.

An Uptick in the Unemployment Rate

The unemployment rate rose from 4.4% in September to 4.6% in November—see Figure 1. The US Bureau of Labor Statistics did not conduct its household survey in October due to the government shutdown. The household survey includes the unemployment rate

Fed Cuts Rates Again, Signals a Possible Pause

The Federal Reserve followed through on what was a widely expected rate cut, reducing the fed funds rate a quarter-percentage point (1 basis point = 0.01%) to a range of 3.50 – 3.75%.

Black Friday’s Spending Spree

A December 1 headline from Reuters sums up the start of the Christmas shopping season: US Holiday Shoppers Shake Off Economic Blues for Online Spending Spree.