Market Alert October 14th, 2018: Is A Market Crash Coming?
As a firm that specializes in retirement planning, our two goals for you are:
- For you to have Financial Peace of Mind and
- For Your Money to Last As Long As You Do.
Our investment philosophy of Buy, Hold, and SELL! is designed to give us Unlimited Upside with a Tolerable Downside.
- This Is the First Calendar Year in the Past Seven Years to Have Three Single-Day 3% Losses.
- Volatility is up 37% versus last year.
- Interest Rates rising have spooked global markets.
- The Trade War with China may become a World Trade War.
This Is the First Calendar Year in the Past Seven Years to Have Three Single-Day 3% Losses.
Stocks declined for six straight sessions before rebounding last Friday, which is the longest streak since before Donald Trump was elected president. The decline is threatening to make 2018 the worst year for the S&P 500 since 2015 and the third-worst of the bull market.
If anyone needed to be reminded of how fast the stock market can change direction and how much it can fall in a short period of time, those six days should have done the trick. The question is, do you have a plan to mitigate your losses if this is the beginning of the next market crash?
According to Ned Davis Research, the average bear market is a drop of 37%. The S&P 500 index fell 49% in the bear market of Y2K and 57% in the bear market of 2008.
In the chart below the red line shows you where an “average” bear market would take the S&P 500 index. The green line shows you what a bear market like Y2K would produce. The purple line shows what would happen if another 2008 were to happen. Another 2008-like bear market would wipe out almost 18 years of growth and take us back to before the year 2000. You can see that the same could be said for a bear market equivalent to the one that happened in Y2K.
Do not get complacent. Overconfidence is dangerous when it comes to investing.
If you are not a client of Money Matters, you should be! Let us worry about all this so that you don’t have to.
- Do you have a plan for what to do when the next market crash comes?
- Do you know if you have enough money to retire?
- What are 5 strategies that you can use to reduce your income taxes?
- How do you plan for your retirement cash flow?
- What should you do to maximize your Social Security benefits?
- Are you diversified the way you should be?
We would love to review your entire retirement plan, analyze what you have and see if we can help you. If we can, that’s terrific, if not that’s fine too. Either way, there is no charge or obligation, and we will part friends!
Volatility Is Up 37% versus Last Year.
Volatility is rising, and that is a sign of nervousness in the market. The CBOE Volatility Index, a benchmark for equity turbulence derived from options prices, is up 37% from 2017.
A lot of things are concerning the markets, from Federal Reserve rate hikes and geopolitical tensions with China to a rising expectation of a slowdown in earnings growth that has supported stocks for years. The most pressing problem, in our view, is probably rising rates: 10-year Treasury yields topped out at almost 3.26 percent this week, the highest in seven years.
We believe that the fall in the market last week was due to a recalibration of corporate profits and consumer spending in a higher interest rate environment. This is a normal and natural occurrence and not something to be panicked about. We do believe that this should be a wake-up call for anyone who is retired or retiring soon who does not have a plan to protect themselves.
I would like to invite you to come to one of our seminars. They are designed for those of you who are retired or retiring soon, and they are free.
At the free retirement seminar, we will answer these burning questions:
- How do I protect my retirement from the next market crash?
- How do I avoid three basic “pitfalls” of retirement distribution planning?
- Am I on track to be able to retire?
- When should I take Social Security? 62? 66? 70?
- Am I diversified the way I should be?
- How much can I afford to spend during my retirement?
- What is the best investment I can use to fight inflation with?
- How do I determine how much risk is appropriate for me?
- Do I take my pension or a lump?
- How do I avoid having 85% of my social security being taxed?
- Should I rollover my 401(k)?
- How do I reduce my income taxes in the future?
With the market near all-time highs, this is no time to be complacent and assume that the market only goes up! The best time to plan ahead for the next market crisis is now!
We believe that the risk that we have today is different than anything we have had in history.
The hundreds of trillions of dollars of global debt has put a significant strain on government’s ability to do anything about the next recession. In fact, we see all of this debt exacerbating the effects of any economic slowdown. The worst recessions that we have had around the world have mostly been the results of governments taking on too much debt.
Look at the chart below:
- Is This 2008 Again?
- 18 Risks Faced In Retirement #6: Frailty Risk
- When To Apply For Social Security – Part 1
- Buy-Hold Myth: You Are A Long-Term Investor
- Estate Tip: Dynasty Trust
It is our singular goal to keep our clients from becoming poor. Preserving the wealth that they have built is job number one for us. I encourage you to join the Money Matters family!
I believe that avoiding large losses is the single most important thing that we should be concerned about as investors.
Perhaps you were given a package by your employer. Perhaps you sold an asset and want to know how to properly invest the proceeds. Perhaps you inherited money and want to keep it safe and grow it if you can. Perhaps you just want a second opinion. These are all reasons for you to take advantage of all the resources that we at Money Matters have to offer you.
We want to help you achieve your retirement goals.
Thank you for subscribing to this newsletter. I hope it finds you and yours in good health and spirits.
Ken Moraif, CFP®, MBA