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AAFCPAs Wealth Management Update: Market Volatility

AAFCPAs Wealth Management understands that the recent market performance may be unsettling to some, given this is the worst volatility we have seen in over 8 years. The current drop in the major market indexes has left many investors concerned about whether or not they should be making changes, and wondering if this may be a repeat of 2008.

AAFCPAs Wealth Management’s investment team has been closely monitoring the market during this time of volatility, and advises clients to keep things in perspective.

On average, the market experiences a 10% correction every year, and a 20% correction every three years. Normally, during a 10% correction, the market drops 13% and it takes 4 months to recover. We have experienced a prolonged period of market calm that has led us to the second longest bull market in history. The S&P 500 index hit an intraday low of 666 back on March 9, 2009. Since then, the S&P 500 is up over 280%. Last week, we experienced two drops of over 1,000 points, and unfortunately, major news outlets reported this drop without properly putting it into perspective. The 1,175 point drop to the DOW (Dow Jones Industrial Average) on Monday was the largest in our nation’s history, but it was only a 4.6% drop to the DOW.

Why is this happening?

The 10 year treasury rate started the year at 2.58%, and recently hit 2.88%. That 30 basis point increase was a rapid increase that was not forecasted into the market. When rates rise that quickly, equities tend to fall. Additionally, the February 2018 jobs report showed a wage inflation number of 2.9%, which was a surprise, as this is a leading economic indicator. This rate led many to believe that inflation was going to come into the picture sooner rather than later, and that the Fed would have to be more aggressive with their planned rate increases. Currently, the market is pricing in 3-4 rate increases in 2019.

Where does this leave you?

AAFCPAs Wealth Management advises clients to continue to follow their long term plan and stay the course. Most intermittent turbulences eventually resolve themselves in the positive.  We are believers that the best route to financial wellness is to weather the storm of short term volatility, until the true facts come to light.  Wealth decisions made with foresight, focus and clarity, combined with your factual and up-to-date life information help you achieve your short and long-term financial goals with the least amount of risk.

Our philosophy, and approach to financial planning takes into account the inevitability of market volatility, and these types of markets. Our job is to help clients select a portfolio with the lowest level of risk in order to achieve their short and long term goals.

If you have any questions about your investment strategy, kindly reach out to your AAFCPAs Wealth Advisor or Andrew E. Hammond, CFP® at 774.512.4143, ahammond@nullwealth.aafcpa.com.  Our mission is to provide valuable peace of mind to those who have the awesome responsibility to manage wealth.