Perspective on the Stock Market Correction of 2018Submitted by Reby Advisors | Certified Financial Planners | Danbury, CT on December 28th, 2018
By Bob Reby, CFP®, December 26, 2018
The below is a copy of Bob Reby's client letter, distributed December 26, 2018, sharing his perspective on the market correction that has occurred during the 2018 holiday season, as well as an adjustment made to many client portfolios.
The Holiday Season is often a time spent with loved ones, a time for reflection and a time for looking to the future and what the new year may have in store for us.
I felt it would also be a good time to share our perspective regarding what has been happening in the market, as well as some of the immediate and important items that we are working on. Within the framework of your customized financial plan, is your purposefully diversified portfolio. The plan is meant to be a fluid document, which means it will be adjusted over time as your life, and your needs, change. The same is true of the investments in your portfolio; there will be adjustments along the way.
Over the past few weeks, our financial planning team has been working hard to harvest tax benefits that may exist in your portfolio. This is something we keep an eye on throughout the year and then execute when it makes the most sense for you.
As we look ahead, you may notice a modest adjustment to your present strategy when you receive your next statement. We made a tweak to many of the portfolios which resulted in an approximate 8% shift from long/short credit fixed income (which was 100% of the position) where approximately 5% was reallocated to intermediate term U.S. Treasury ETF and the remaining 3% to large cap value equities. The purpose of these adjustments was to include positions that will work for you in our current environment yet remain consistent with your investment policy. In addition, it will result in a reduction of your overall portfolio costs.
As for the major investment markets, you don’t have to look far to find negativity from the financial media; it seems as though they are starving for a disaster. Without downplaying the importance of a market correction, or the seriousness of it, we will still refer to it as a “blip”. Why is that? Since the market lows (S&P 500) of March 9, 2009, until recently (almost a decade) the S&P 500 has experienced a 257% upward climb (not including dividends). On September 30, 2018, the S&P 500 (often considered the bellwether index) reached an all time high of 2,930.75. As I write to you today, it is 2,351 which is almost 20% lower than the all-time high.* Again, I’ll add some perspective; since 1980, each calendar year has experienced an average drop of almost 14% per year. In February of this year, we had a correction just shy of 10%. **
So, what I am saying, is that It is quite customary for markets to digest gains. I am not saying that it’s fun, but it is normal. However, it’s quite possible you might still see the word “Armageddon” woven into the financial media. We won’t argue that this correction is over, as we are in the midst of an average annual correction as the last 38 years have demonstrated. Obviously, we can’t consistently forecast any market in the short term, nor can anyone else.
That’s all for now. We are excited about 2019 and will continue to work diligently on your behalf. Please continue to challenge us, as it helps us to better serve you. Enjoy the remainder of the Holiday Season.
All the best,
Robert J. Reby
President and CEO
**Nick Murray Interactive
If you would like portfolio advice for 2019 and beyond, call Reby Advisors at (203) 790-4949 or click here to request a 15-minute discovery call with a financial planner.