Investor’s Business Daily summarized the market today: “The stock market today stumbled as oil staged uneven declines following the confirmation of a sharp reduction to the International Energy Agency’s oil demand growth estimates for 2016. The change put the year’s average increase in demand at 1.2 million barrels per day, down from initial projections for 1.8 million barrels. A sharp slowdown tripped the change and caught many industry watchers off guard.”
Today the S&P 500 fell 1.94%, the NASDAQ -2.21%, and the Dow -1.76%. For the week the S&P 500 was down 208.80 or 4.1%, the NASDAQ -4.1%, and the Dow -582.42 or -3.3%. It was the worst week for Small Cap stocks since May of 2012. In the commodity sector WTI Crude Oil fell a whopping 10.9% on the week!
What about my 401 (k) or retirement account? What about my stock portfolios? Is it time to sell? Is it time to buy? Is it time to buy freeze-dried food? Is it time to panic?
What’s interesting is the S&P 500 as of this morning was only 3.9% below its ALL TIME HIGH! However it certainly doesn’t feel that way. Yes we’re aware the market is not as healthy as that may suggest. This is due to the the dominance of a few stocks nicknamed FANG’s (Facebook, Apple, Netflix, & Google). Many other stocks are nearer their lows for the year rather than their highs.
There are many crosscurrents in the investment waters right now. We wrote last week about the coming interest rate decision next week by the Federal Reserve Board. Many suggest the market weakness this week is in response to the greater likelihood they are going to raise rates. Many times the preceding market movement is worse before whatever event is coming up, and when it actually happens things improve. We’ll watch closely next week.
In addition the Retail Sales numbers came out this morning. It appears holiday shopping got off to a rather healthy start this year. This seemed to be true in stores as well as online shopping. The behemoth Amazon rose a respectable .6% from October, and is up over 7% compared to a year ago. Clearly online shopping continues to accelerate, but companies with storefronts aren’t going away anytime soon either. Also much debated as to whether it’s a positive or negative, gas prices are likely to continue going down…good for consumers, not good for those in the oil business.
We never believe in either panicking or making knee-jerk decisions based on a day or week of market volatility. We wrote a year ago in BALANCED INVESTING IS PART OF A BALANCED LIFE, “We recommend a holistic approach, and evaluate all of your holdings, not just one account such as your 401 (k). In other words, take stock of all your investments, and periodically consider your overall asset allocation.”
As we careen toward the end of 2015 it’s a great time to reevaluate your portfolios, and take a look at your overall risk. It’s also a great time to consider your overall Risk Tolerance. We spend a lot of time with clients when evaluating portfolios to make sure we understand their attitude toward risk. It’s easy to be aggressive in up markets, not so much in down markets. If you’re having doubts, chances may be you may have too much risk in your portfolios.
We’re not trying to paint a rosy picture or blindly cheer for stocks to continue going only up. Merely we’re encouraging people to take a deep breath, look at the bigger picture, and not be overly concerned about a week or two. Be intentional about investing. You will find it removes much of the stress you may be feeling after a week like this.
If you have a trusted advisor, touch base with them to take a look at how much sensitivity your portfolios have to market risk. If you don’t, give us a call – we’ll take a quick look under the investment hood and let you know at no charge. We’re here to help.
Be careful out there!