June Market Perspective
We are starting staring to hear grumblings lead by the emotion of a volatile downward, (never hear anything during the ups) stock market. Let’s keep this in perspective. Last year we had one of the biggest up years in history. During the crash of 1987 the Dow Jones Industrial average fell from 2750 to 1900. People predicted that the world was ending, and for those that got emotional and made reactionary decisions it did for them. Today the Dow Jones Industrial average hovers around 10,000, which is a fivefold increase in your money over the last 23 years. Those numbers are compelling since we even experienced several presidents, recessions, and terrorist attacks over those same 23 years.
What causes our worry is only the volatility, overarching joy and confidence when going up and fear and uncertainty when going down. As we have written about on several occasions this year in our Cedrus 180 newsletters (copies are available on our Website under the “media” link), this volatility is not going away in our lifetimes and in fact will increase due to the proliferation of information via technology and the media. Get used to it. Because if you don’t you will only suffer in the years ahead. Find attached a piece from SEI on where they stand in the current short term environment. Long term, things are very, very bullish since there is still a lot of cash on the sidelines and the economy is still trying to just get going.
We at Cedrus have confidence in our approach to your portfolios because they are based on proven time tested strategies based around asset allocation. As such, SEI was harvesting gains for you late last year and earlier this spring due to rebalancing. The same can be said in that they are buying more equities in this pull back (buying low) as the asset allocation mandates. Not based on some weak and emotional prediction as is dominate in the media today. Focus on your lives and all the good things you are doing in the lives of others. There you will find the grace and peace to ignore the worries of the others yet to understand this contentment. Then 23 years from now if and when the Dow Jones Industrial average crosses 40,000-50,000, you can say “I told you so” to the media watchers. But you will have had a richer life than them along the way.
If you are still experiencing a lack of contentment in all this, please reach out to us and let work through the issues. We have solutions.
John A. Scott
President
Cedrus
Investment Update: Market Volatility Continues
From a market perspective, the month of May had more than its fair share of challenges. The Dow Jones Industrial Average fell 7.92% for the month, the worst percentage decline for the month of May since 1940. In addition, markets have been highly volatile, as shown by the Chicago Board Options Exchange Volatility Index (VIX), a measure of implied volatility in the S&P 500 Index that is also known as the "fear index;" it rose from 22 at the end of April to 33 by the end of May. From continued gloom cast by the sovereign-debt crisis in peripheral Europe to the "Flash Crash" on May 6, when U.S. blue-chip stocks made a staggering 1,000-point decline before recovering a majority of the drop by the end of the day, it is easy to see why investors remain cautious.
By: Kevin P. Barr, Head of SEI Investment Management Unit
CLICK HERE TO READ Full Article
For Fun: March 6, 2009
Yes the downturn in May was tough to stomach, but let's for a moment take ourselves back to March 6, 2009. This video is a collection of media reports for that day. Try for a moment to take yourself back to that day and remember your emotions. Now imagine if you would have listened to them on that day. This is the day the panic was the greatest as the market hit rock bottom on March 9th, the very next trading day. We have come a long way since March 6th, 2009. Please click on the link to watch the full video.
Video: http://www.youtube.com/watch?v=ZaM7b9rwtqA
All material represents an assessment of the market environment at a specific point in time and in not intended to be a forecast of future events, or a guarantee of future results. This information should not be relied upon by the reader as research or investment advice. This information is for education purposes only. Index performance returns do not reflect any management fees, transaction costs or expenses. Indexes are unmanaged and one cannot invest directly in an index. Past performance does not guarantee future results. There are risks involved with investing, including loss of principal.
Information presented in this letter is believed to be factual and up-to-date, but we do not guarantee it accuracy and it should not be regarded as a complete analysis of the subjects discussed. All expression opinion reflect the judgment of the author as of the date of publication and are subject to change.
Information presented does not involve the rendering of personalized investment advice, but is limited to the dissemination of thoughts and opinions on investment topics. All investment strategies have the potential for profit or loss.
Changes in investment strategies, contributions or withdrawals may materially alter the performance, strategy and results of your portfolio.
Information presented is not an offer to buy or sell, or a solicitation of any offer to buy or sell the securities mentioned herein.
Different types of investments involve varying degrees of risk, and there can be no assurance that any specific investment will either be suitable or profitable for a client's investment portfolio. Cedrus does not provide tax advice. Please note that (i) any discussion of U.S. tax matters contained in this communication cannot be used by you for the purpose of avoiding tax penalties; (ii) this communication was written to support the promotion or marketing of the matters addressed herein: and (iii) you should seek advice based on your particular circumstances from an independent tax advisors. Sources: Information provided by SEI Investments Management., a wholly-owned subsidiary of SEI Investments Co.