Recent Stock Market Weakness

I got this from my financial advisors & think it's worth sharing with you .

 

Date:                July 11, 2008

 

 

We have just experienced the worst June for the stock market since the 1930s and this means your June 30^th statements are not going to be pretty.   

 

Both the Dow Jones and S&P 500 Index have now officially entered bear market territory, as measured by a 20 percent decline from their peak levels.  Many international markets are performing even worse than domestic markets.   It is hard to avoid being reminded of these things especially for those of us masochistic enough to “enjoy” watching financial news reports. 

 

 

As we discussed in our correspondence in January of this year entitled “Some Thoughts on Market Volatility,” periods of negative returns are to be expected.   However, predicting a negative market ahead of time is a loser’s game.

 

 

There is an English Proverb from the 1600s that says “He that cannot abide a bad market, deserves not a good one”.  The same holds true today more than 300 years later.    

Bad markets happen from time to time, approximately every four to five years as measured by some indexes.  If history teaches us anything, it is that markets don’t go down forever. In fact, unless this time it really is different, we believe markets are likely to be higher in the future than they are today. 

 

 

Once again, 401(k) investors currently have a wonderful opportunity of buying equities at a 20% discount to where they were previously trading.  It is at precisely times like these that shrewd investors are excited to be in the market.  Things can certainly get worse before they get better.  However, we believe over the long term equity prices will be higher in the future than they are currently, and investors that can be buyers when others are sellers will benefit over the long term.   

 

 

The sentiments in the English proverb from the 1600s are true today.  Don’t panic in a down market.  View times like these as buying opportunities.  Stay true to your investment approach and you are likely to be rewarded in the long term.