October Recap - 7 items to share
David Hobbs, CFP?
Wealth Advisor | Founding Partner of Hobbs Wealth Managment, LLC
FINANCIAL MARKETS (source: Yahoo Finance, as of 11/01/2018)
S&P 500: +2.50% YTD | +6.24% YOY
Russell 2000 (Mid and Small cap): +-1.61% YTD | +4.82% YOY
Emerging Markets (MSCI EM): -14.07% YTD | -11.54% YOY
SEVEN OBSERVATIONS TO SHARE
1. October Stats +13.6%??: The S&P 500 lost 6.9% in October, the worst month since 2011. The 6 month win streak for the S&P 500 is over, but here’s the silver lining. Since 1990, we’d had 10 other 6 month win streaks, and the index was higher every single time 12 months later, up +13.6% on average. (Source: LPL Research Blog)
2. Diversification Update: In about the last month, the market has shed about 10%, as of today’s writing, it looks like we’re starting to see a turn. I am VERY proud to share that several my clients took the bold step to buy new shares on the way down, this is historically, simply a buying opportunity. In my opinion, buying shares on the way down is an opportunity.
3. Diversification Continued: I have heard from several folks who are concerned about some of our assets classes, which are, performing poorly against the broader market. I FULLY understand where this is coming from because it’s only human to want to get out of our losers and buy into our winners. This is of course the OPPOSITE of diversification. To that end, let me share the Six themes of our Investment Philosophy
o Equity diversification allocates assets among different sectors, styles and geography
o Goal of Equity diversification is to lessen short-term volatility and realize full market returns in the long run
o In a properly diversified portfolio, something is always underperforming
o The last thing we’ll want to do is sell the losers and buy the winners, that is ipso facto the opposite of “buy low sell high”
o Rebalancing on a regular and disciplined schedule is how we “buy low sell high” – we harvest some of the gains in the leaders and buy low on the laggards.
o I FULLY admit, I have an idea on what’s going to come, but I will never know what’s going to happen next… and no one else does either…
4. Barron’s Headline: On October 10th, Barron’s had a headline that kept changing, it went something like this… “Dow Drops 700 Points Because Everyone Is Afraid of Something.” Over the last several weeks I’ve fielded several inquires regarding “Why” is the market falling. Take your pick… rising interest rates, rising inflation, slower global growth, etc… What the market seems to have forgotten is that corporate earnings and dividends are still rising sharply, consumer balance sheets are superb, small business confidence is near record highs, we have more job openings than we do unemployed citizens, and by the way, the U.S. just became the World’s largest oil producer.
5. Oil Production: This point was already noted, but it’s worth repeating. The U.S. just became the world’s largest oil producer. We’ve come a long way from the 1973 oil embargo. EIA Oil Production
6. Earning Season update: I’m thrilled to share that being about over half way through corporate earnings, we could have another record quarter for earnings. Earnings Dashboard
7. Wealth: For all those reading this, I’m like you. I have my wealth invested in profit-seeking enterprises (stocks) managed by rational persons who actively and continually respond to the reality of price signals from the world at large making economic and financial decisions in their own best interests. This counter-balancing has shown to work for everyone’s best interest.
In closing: We don’t know when the next market downturn will occur. I advise we do what long-term, goal-oriented investors do when this does happen, we ride it out with eyes wide open. Additionally, we of course, cannot control what the market does from here and we cannot predict when the next market downturn will occur. But we can control our behavior to these outside events.
As always, that you for your trust, if you have any questions/concerns please contact me. Finally, if you feel this email would be beneficial to someone else, feel free to share with them, I don’t have anything to hide.
-Dave
David Hobbs, CFP?, CLTC
Wealth Advisor – Charter Advisory Corporation
250 E. 96th St. Suite 200
Indianapolis, IN 46240
Office: 317-844-7416
Cell: 317-260-3722
Investment advice offered through Charter Advisory Corporation, a registered investment advisory and a separate entity from LPL Financial. Securities offered through LPL Financial, Member FINRA/SIPC.
DISCLOSURE: The opinions voiced in this material are for general information only and are not intended to provide specific advice or recommendations for any individual. All performance referenced is historical and is no guarantee of future results. All indices are unmanaged and may not be invested into directly. There is no guarantee that a diversified portfolio will enhance overall returns or outperform a non-diversified portfolio. All investing involves risk including loss of principal. No strategy assures success or protects against loss. The Standard & Poor’s 500 Index is a capitalization weighted index of 500 stocks designed to measure performance of the broad domestic economy through changes in the aggregate market value of 500 stocks representing all major industries.