The U.S. Market Hit its Most Recent Peak Followed by a Tumultuous Sell-off.
March 2, 2020
Approximately two weeks ago we shared our commentary, “Stay Over Your Skis.” Only four days later, the U.S. market hit its most recent peak followed by a tumultuous sell-off. The Coronavirus went global and fear spread at an alarming rate. The Dow Jones Industrial Average dropped over 12%; the worst week since the financial crisis of 2008. Unfortunately, many investors lost their balance because they didn’t “stay over their skis.”
We at TPW believed that several U.S. stocks were already over-priced based on their earnings growth projections and that, coupled with economic output slowing, market fundamentals would soon be put to the test. Therefore, our call was not prescient. Instead, it was common sense that growth had to either accelerate or stock prices had to adjust at some level. That said, our reminder proved to be timely.
Recent events bring to mind the story of Rip Van Winkle, who, while in the Catskill Mountains of New York, famously fell asleep during the Colonial Era and awoke 20 years later. Having missed the American Revolution, he returned to a world vastly different from which he left.
To keep things in market perspective and perhaps provide a moment of calm, let’s look at a few comparisons of the Dow Industrial Average:
|December 31, 1990
(30 years ago)
|December 29, 2000
(20 years ago)
|February 28, 2020
(4 days ago)
There have been periods of extreme volatility in the recent past. In spite of this, if you have established your goals and have a well-diversified investment strategy in place, you could potentially have done quite well slumbering alongside Mr. Van Winkle and found yourself returning to greater wealth without the stress of day-to-day, month-to-month, or even year-to-year market ups and downs. Remember that “time in” the market will prove to be much more valuable and lucrative than “timing of” the market.
Now, take a deep breath. Consider your goals and make certain that your long-term strategy remains sound. We at TPW are not by any means discounting the severity of this most recent market sell-off or the heartbreaking human toll that the Coronavirus is exacting. We trust that similar to other periods in history, we will be well served by evaluating our plan, keeping our investments in the appropriate allocation of assets, and exercising patience, while we continue to strive for calm, good health, and prosperity in the coming days, months, and years ahead.
This material prepared by TrinityPoint Wealth is for informational purposes only. It is not intended to serve as a substitute for personalized investment advice or as a recommendation or solicitation of any particular security, strategy or investment product. Opinions expressed by TrinityPoint Wealth are based on economic or market conditions at the time this material was written. Economies and markets fluctuate. Actual economic or market events may turn out differently than anticipated. Facts presented have been obtained from sources believed to be reliable. TrinityPoint Wealth, however, cannot guarantee the accuracy or completeness of such information, and certain information may have been condensed or summarized from its original source.