The stock market is blowing off some more steam this week by declining again after having ended the very unhealthy parabolic rise I identified in my January 20th client letter (the parabola ended on January 26th). At the same time, everyone is trying to figure out how a trade war, rising geopolitical risks, inflation concerns, $21 Trillion of U.S. government debt, tax cuts, and rising interest rates all impact the prospect of future investment returns. It’s a lot to digest. However, on a long-term time frame, this decline looks insignificant and is nothing like what the market is capable of dishing out.
Technically, the volatile movement beginning in February looks like a classic possible start to a longer-term downtrend — a series of lower-highs and higher-lows, followed by a break of the attempted uptrend. Where it goes from here is anyone’s guess, but the fact that we are sitting at historically high valuations has me positioned defensively in our portfolios.
At the moment, the stock market is down 10% from the January 26th peak. At some point in the future — maybe next month, or maybe in a few years — it will be down 20%, 30%, or more. That’s just part of the process. If that concerns you, just ask me for an update on your personal potential drawdown and the steps we’ll take to take advantage of the decline.
When declines inevitably happen, the question I am asked most often is “Am I okay?” or “Are we still on track?”.
To help answer this question whenever it comes up, we are making a new report, available in our Financial Planning portal, that tracks your net-worth within the range required for your goals to be met. The report is updated automatically with your account values so you can check on it anytime, even from your mobile device.
We just need to set up the report for you and define the target zone based on our planning work. So if you already use the Financial Planning portal, just let me know you’d like the report activated. If you are not using the portal, we can send you an invitation and begin the setup process with you.
Rebecca and I are heading out to celebrate our 20th wedding anniversary this weekend by doing our best impersonation of James Bond and his beautiful co-star at an undisclosed location.
I hope you have a wonderful weekend too!