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A Brief Reminder on the Value of Perspective

Posted on 02/07/2018

 

2/6/2018
Mark A. Gajowski II, CFP®, CLU®, CEBS®, AIF®


Good day!  I’m writing this on the morning of the third day after several historic point swings (read: mini market corrections) in the market.  Before I go too much further, please excuse me if I am stating things that any of the individual readers of this may already know.  I am attempting to write this piece to be informative to a general audience, but useful as a reminder to all to keep things in perspective. 

Additionally, it’s also important to remember that most of the public get their information through a news media outlet – whether that is MSN, television, newsprint and magazines.  Do be aware that these outlets are for-profit and are paid to get subscribers to market to the folks who watch them and “glue” you to their programming.  They don’t care what it is that you are glued into, whether it is the Super Bowl, the Weather or recent Market Volatility.  It is just something to get and keep your attention…. Remember when every storm didn’t have a name???

Ok – back to the meat of this -- you may be asking yourself, what is the “market” that the pundits are always referring to… well, generally they are referring to either the Dow Jones Industrial Index, OR the S&P 500 Index. Both of these unmanaged indexes are sample index representations of the overall stock market.  Granted, not an ideal match, but fairly consistent if used in the right manner.

Now, we are all generally blessed with a wonderful coping mechanism for challenges – its’ called Short-Term Memory.  To the parents out there – you know what I mean.  There has not been a correction since early in 2016, and that little blip barely qualified as such. In fact, the S&P 500 has risen 18 of the last 20 quarters and has not turned a negative quarter since late 2015!  In a normal year, the S&P 500 normally fluctuates more than 1% per day quite frequently. In fact, the market on average experiences fluctuations of 1% or greater on half of the trading days each year. In 2017, the market only fluctuated more than 1% just once every twenty trading days, making it the least volatile market year since 1982!

Given that lack of volatility, it is easy to forget that stock market pullbacks and corrections do happen all the time, and are very normal.  Recall that a large point correction is really just proportional to the larger size of the market we are dealing with today. Again – perspective

Rest assured, this is not the market that mirrors in any way the technology “bubble” of 2000, or the sub-prime debacle of 2008!  Now, that does not mean that volatility and continued such will not occur, of course it will.  Investing involves risk, and risk is proportional to desired return.  Hence, it is not a short term game, but a long-term strategy to be employed as part of a sound plan. 

If it helps, think of many such corrections as great times to perhaps consider buying quality companies that are market leaders at reduced prices (read: sale) – and who doesn’t like a sale!  If you are in the market, do not worry, this too shall pass.

Consider this interesting cross section of stocks at different points on this trading day in 2016, 2017 and today.  Would you be happy owning them knowing same?

For example, NVidia (NVDA) – traded at $26.03 today in 2016, $114.00 in 2017 and crossed $250 before this recent pullback. 

 

 

February 8, 2016[1]

February 6, 20171

FB

$100.41

$130.98

AAPL

$93.13

$129.13

AMZN

$452.10

$756.00

NFLX

$80.57

$140.00

 

Part of the services a good professional provides is being able to keep you focused, keep you in the game and help you when you need it.  We say here all the time – we have seen this movie before…

If you’d like to speak, please do not hesitate to reach out, we are always glad to provide counsel and guidance.  Continued success towards your goals!

 

 

Mark A. Gajowski II, CFP®

CLU®, CEBS®, AIF®

Founder and President
Magii Group of Companies

 

 

 

 

 

Financial Planning and Investment products offered through Mark A. Gajowski II, Registered Representative. Securities offered through American Portfolios Financial Services, Inc. (APFS) Member FINRA/SIPC. Investment Advisory Services offered through American Portfolios Advisors, Inc. (APAI) an SEC Registered Investment Advisor. magii inc. is not affiliated with APFS and APA.



[1] Stock prices from Morningstar.com

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