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Market Update - Thanksgiving in July

This year is shaping up to be another good one for the U.S. markets, as evidenced by the following newsletter, authored by Doug Blanton.  It points out an interesting, although somewhat disturbing fact, that the stock market has not had a substantial correction in quite some time.  Our conclusion is that we should expect one.  Having said that, and understanding that markets are impossible to predict, we do not recommend abandoning your individual investment strategy; but, rather, manage your expectations.  We, along with Doug and the Merit Financial Group Investment Department, are committed to monitoring developments and responding with intentional investment strategies.

 

As a student of the markets I always enjoy looking back through past ups and downs to learn from both our victories and our mistakes.  This summer as we reflect on a successful start to 2017, we are thankful beyond measure for our team at Merit and the investment process we implement together.  It is like having Thanksgiving in July!

 

There are only a handful of occurrences where the U.S. stock market has consistently risen like it has since March of 2016.  During the past 16 months, 15 have been positive and only 1 has been negative. In other words, during this time the markets as measured by the S&P 500 Index has been positive 94% of the time.  To put this into perspective, the long-term average is 64% positive and 36% negative.  You have to go back 22 years to 1995 before you find a similar stretch of positive performance. 

 

                                                                                                                                                                                                               

If you can remember back to late 2015 and early 2016, markets were not looking so great.  The price of oil dropped below $30 per barrel, putting pressure on many energy-related companies.  This one event set off a round of fearful selling, leading to a 13% decline as recorded by the S&P 500 Index.  Sticking to the thankful theme, I am extremely proud of our investment process and the team behind it who correctly recognized the market decline was an overreaction.  Some adjustments were made where needed, however our investment themes changed very little which has allowed our clients invested in stocks to fully participate in the upswing.  In addition, the markets overreaction to the downside ultimately led to the finding of a few opportunities in the growth area which have done well so far this year. 

 

Since the presidential election in November 2016, markets have priced in many of the ideas spearheaded by the Republican Party, such as lower taxes, less regulations and large infrastructure projects.  Should these policies become a reality, I suspect the economy and quite possibly the investment markets will react favorably.  If there is a sizable delay in the movement of these bills through congress, expect markets to give back some of the positive performance discussed above.  Despite the timing, we believe the positive trajectory of our economy would remain intact.

 

Doug Blanton, CFA®

LPL Registered Administrative Associate

Director of Investments, Merit Financial Advisors

 

 

 

                                                                                                                                                                                                               

The opinions voiced in this material are for general information only and are not intended to provide specific advice or recommendations for any individual. To determine which investments(s) may be appropriate for you, consult a financial professional.

The economic forecasts set forth in this letter may not develop as predicted and there can be no guarantee that strategies promoted will be successful.

The S&P 500 Index is a capitalization-weighted index of 500 stocks designed to measure performance of the broad domestic economy through changes in the aggregate market value of 500 stocks representing all major industries.

Tracking # 1-627086

 

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