During the past few months the worldwide Economy has been so very uncertain, all because of a pandemic no one expected. Yet, we have been warning of such uncertainty after eleven years of an amazing, possibly once-in-a-lifetime bull market.
As investment advisors, we continually work at controlling our greed and fear. Looking forward, one question is whether the stock market will skyrocket from here as everyone gets back to work (a “V”-shaped recovery). Or, will the market plummet again, this time to even further lows (a “W”-shaped recovery, possibly turning into a “U”-shaped or “L”-shaped recovery)? At first glance, it seems the market will continue to move up, but after a month-long rally there is an equally good chance the stock market may go either way. The problem is the uncertainty of what the future will bring.
Comparing our pandemic economy to the starting point of the Great Recession, it took three weeks for the market to drop the same distance that it took a year in 2008.**
It wasn’t until October 2008 that the S&P500 reached the same volatility. After the big drop the market capitulated and fell an additional 14% to March 9, 2009, the day the market turned around.**
Where does the market go from here? It would be foolish to think any one knows for sure. That is why distributing your portfolio in each investment style is wise when diversifying among your asset allocations. The styles are Strategic, Tactical, and Alternative. The percentage in each style depends on your needs, the length of time you have before you will begin your retirement, and your risk tolerance.
One of our trusted Tactical portfolio managers, Phillip Toews, shares some valuable information, no matter what your investment needs are in his letter The Markets May Have Just Given You an Opportunity. We encourage all to follow the link and review the letter. If you feel a need to reposition your portfolio to either take advantage of, or protect yourself from more volatility ahead, please contact us.
- David Hoefferle, Erik Ludvickson, and Daniel Hoefferle CFP®
**Historical Data from S&P500 as reported by finance.yahoo.com. 2008 closing values adjusted to match starting point on 2/19/2020.