By Tyler S. Henderson, Senior Advisor
As a new member of the GCADA, I thought it would be helpful to members to provide some commentary on the recent market volatility, and what the future may hold.
October was a challenging month in both domestic and international stock markets. Quarterly returns through November 19 have been negative enough to impact most of the gains built during 2018, and have affected all stock sectors:
|Index||Representing||Quarter to Date||Year to Date|
|S&P 500||Large US||-5.84||4.11|
|Dow Jones 30||Large US||-3.64||4.87|
|Russell 2000||Small/mid US||-9.83||0.55|
|Russell 1000 Growth||US Growth||-9.07||6.47|
|Russell 1000 Value||US Value||-3.14||0.66|
|MSCI EAFE||Large International||-7.94||-8.85|
|MSCI EM||Emerging Markets||-5.76||-12.73|
Source: J.P. Morgan Weekly Market Recap, November 19, 2018
The most headline grabbing downturn occurred on October 10th, when markets were off more than 10% from their previous highs, indicating a “correction” had occurred.
Longer Term Perspective
After a strong 2017 and a bull market that is now more than 10 years old, corrections like we experienced in October can be uncomfortable. Keep in mind, however, that corrections like this are perfectly normal. Since World War II the US stock market has experienced a major correction (defined as at least a 20% drop) about once every five years. This is also the second time this year we have experienced a 10% correction (first one occurred January through mid-February but was quickly eclipsed by strong gains thereafter). Despite these regular events, the market’s long-term path is still strongly upwards.
The US economy continues to show strong results and future potential across important factors such as:
- GDP growth – north of 3%, above the 50-year average
- Corporate profits – still growing, albeit not as rapidly as in recent years
- Unemployment – among the lowest levels since the 1960s and well below 50-year averages
- Inflation – still under control at 2.5%
- Consumer confidence – at highest levels in years
- Household net worth – highest ever
- Forward looking P/E on the S&P 500 at 15.5x, below the 25-year average, indicating US stocks are slightly undervalued
In short, we feel the recent correction was overdone and is not accurately reflecting the strong economic fundamentals. With the election behind us and the Fed signaling a cautious gradual rise in interest rates, we feel the market is primed for solid results.
We’re Here for You
We understand you may have questions about recent market performance or other areas of your overall financial wellness. Feel free to call or email us with questions, and we will be happy to schedule a free meeting discuss these topics with you in more detail.
If we don’t get a chance to connect, we wish you peace and joy this coming holiday season and throughout the coming year!
Oxford Financial Partners