Banknotes

In light of recent volatility attributable to the spread of the coronavirus – technically, COVID-19 – it's appropriate to provide some insight into what is happening in the equity markets, and how State Bank of Cross Plains' wealth managers are responding. The drama that has played out over the past couple of weeks has resulted in a correction (a 10% drop from a recent peak) in the stock market in an extremely short period of time. In fact, right before the outbreak, markets had hit an all-time high. The perceived severity of the downturn (due to its rapidity) has stoked fears of a 2008 market sell-off and, perhaps, a recession.

It's only a slight exaggeration to say that 2019 was a year that rose out of the ashes of the fourth quarter of 2018. People’s memories seem to be getting shorter, so it can be easy to forget how bad that quarter was. Technically, the economy entered a bear market in December, though many may not have realized it at the time. The reason being, most people measure such things at the close of trading each day, and while the market did hit a point where it was down 20% from its peak, it didn’t close that way. If it had, economists would be either talking about a new bull market or looking for a catalyst to set the stage for one. Given the speed of the market’s recovery, benefited by several record-setting highs, it is safe to assume that the longest-running bull market in history continues unabated, likely with more to come. The past year returned exceptional results in virtually every category, including fixed income.

No getting around it: August was a rollercoaster. Market volatility increased, understandably impacting investor confidence. So what do we have to look forward to in the near future – an upswing, a downswing, more of the same?

Summer has arrived, and with it, the return of long, hazy days, filled with lazing by the pool, or on the beach, or at the lake. A sense of peace and calm, that things are just right in the world. 

The following article – republished here courtesy of Broadridge Investor Communication Solutions, Inc. – contains sound advice for investors of any age and level of expertise. Regardless of one's market savviness, employing a back-to-basics approach can help keep things simple and provide perspective on one's goals and how best to achieve them.

If you are a fan of the mundane things in life, then 2018 was not your kind of investment year.  On the other hand, if you thrive on the wild side, then the markets did their best to take you along on an adventure.  A challenging year to say the least.  The same might be said about 2019 once it is in the books. 

Sometimes it seems like you are spinning your wheels and never getting anywhere or to put it another way you seem to be going in circles.  Seems appropriate since the markets continue to spin their wheels and essentially go nowhere.  While the heightened levels of volatility have receded a bit, investors have faced a barrage of newsworthy events so far in 2018 that left many bewildered and confused as to what to do.  That is where asset allocation and a long-term perspective come in as they can allow one to (relatively) calmly sail through these bewildering markets.  As unusual as it may sound, however, a prolonged sideways move can act as a kind of correction that is somewhat easier to take than the gut-wrenching drops that a faster correction typically delivers. 

Sometimes it seems like you are spinning your wheels and never get anywhere or to put it another way you seem to be going in circles. That kind of describes the markets this year. Yes, January and February saw big moves – first to the upside and then to the down. Since then, however, the moves have been somewhat similar but on a much smaller basis. The good news is that volatility has settled down a bit – not to last year’s levels by any means but less than February’s levels. Is this good news or bad or just a pause before some major moves later this year? First, the markets and then we’ll briefly try and tackle those questions.

Last month I asked if you were feeling a bit frazzled.  If you weren’t then, you probably are now.  February was the first month in well over a year where the equity markets were negative and the ride down was a wild one.  Since no one expects the markets to move higher every month that is hardly surprising, unlike the return of volatility.