In elementary school, my Spanish class put together a short theatrical reproduction of the Chicken Little story. I think we all got to take turns being Chicken Little, fearfully stating “El cielo se esta cayendo!” I was reminded of Chicken Little’s plight today while watching the markets fall apart and the headlines that were being conjured up. “Perfect Storm for Market correction: expert,” “Threefold reason for selloff,” and my favorite of the day, “Start of a correction? No, say experts.” No wonder the general public is confused by the so-called financial news reporting. So is the sky falling or is it just a few acorns?
To quote Ayn Rand’s Atlas Shrugged, “Contradictions do not exist. Whenever you think that you are facing a contradiction, check your premises. You will find that one of them is wrong.” How I interpret this is that facts do not contradict each other, it’s the opinions we form with the given facts that can be contradictory. I read the three articles and while each author is citing facts, their opinions on what will happen next vary greatly. Here’s a synopsis of what happened today, Friday, April 17, 2015:
- The Greece exit from the Euro might be on the table…again (the greek tragedy that has no ending)
- The Chinese passed a law to ban margin trades on over the counter stocks after the Asian markets closed
- There was a temporary Bloomberg terminal outage that postponed a UK bond offering
- Earnings season is in full swing which typically brings volatility and earnings are deteriorating (slightly)
- Investors are trying to determine when the Fed will raise rates (we have been for 6 years)
- US stock valuations are stretched (still)
- Economic momentum in the US seems to be waning
I think most of these bullet points will prove to be acorns as history has shown (especially number 3). Numbers 1, 4, 5, 6, & 7, aren’t really new news. It’s the same story different day. So while I believe that these factors will play into some short term volatility, there is no definitive trend indicating a meltdown. And remember, a 10% pull back is not a meltdown, it’s normal. My fundamental stance on investing has not changed due to today’s market volatility…be diverisifed, take on the appropriate amount of risk that will let you sleep well at night and still achieve your short term and long term goals, and be an investor, not a trader.
Until next time, which I promise will be sooner than last time (I blame the snow for freezing my inspiration), watch out for those acorns.
All the best,
LPL Wealth Advisor
Williamsburg Financial Group
The opinions voiced in this material are for general information only and are not intended to provide specific advice or recommendations for any individual security. To determine which investment(s) may be appropriate for you, consult your financial advisor prior to investing. All performance referenced is historical and is no guarantee of future results. Indexes are unmanaged and cannot be invested into directly.
Economic forecasts set forth may not develop as predicted.
All investing involves risk including loss of principal.