“Your Vision, Our Expertise: Your Peace of Mind” ®


Market Commentary 09/30/2017

Why do markets worry us?

This past quarter resembled the previous one in many respects.  The major indexes were all setting records, in some cases daily.  Although increases slowed, the Dow Jones Industrial Average was up 4.9% and the S & P 500 up 3.52%.  The NASDAQ Composite Index was up 5.63% and the MSCI EAFE (International) index was up 3.53%.  New themes have emerged during the year that intensified the so-called “Wall of Worry” which can form at major market peaks.  The current short-list of concerns includes geopolitical tensions, potential replacement of our current Federal Reserve chairperson, the tax overhaul proposal, healthcare repeal and all-time market highs.

65% of investment managers surveyed last quarter by Northern Trust believe shares are over-valued, the highest ever in the firm’s report.  Bank of America Merrill Lynch and Federal Reserve policymakers have also expressed alarm about higher prices.  Robert Shiller, Nobel Prize-winning economist at Yale University, says the share gains reflect optimism about where the economy is heading, but is an unreliable forecasting tool and shifts quickly.  He goes on to say, “The stock market is mostly psychology.  The fluctuations in it mean that we’re in an optimistic mood but we could change and we could change suddenly.”

Market increases can be a general surface distraction or may give investors a perceived sense of security as they see no end in sight.  Although optimism exists today, investors are always faced with fear of the unknown.  Information is readily available, coming from many sources and devices multiple times daily.  Sifting through the data, it’s hard to decide what is noise and what is real.  Simply stated: We don’t know what may happen with any of these concerns and we don’t know how the market will respond.  It’s difficult to predict whether this optimism will change to pessimism anytime soon.  Investors need to understand that it’s normal for markets to rise and fall.

Preparing for a market decline in a rising market is difficult.  We’ve learned from down markets like 1973-74, 1987, 2000-2002, and 2007-2009 that we can thrive, not just survive, when the market changes direction. I remember Monday, October 19, 1987.  The Dow Jones Industrial Average (DJIA) plunged 508 points to 1,738.74, equivalent today to a 5,100-point decline or 22.6%.   It’s known as “Black Monday,” the worst day in stock-market history.  Investors were stunned and their confidence shattered.  The market had advanced for almost nine years with no end in sight. No one knows exactly why it fell but investors’ worries heightened.  Were there concerns or even references to the 1929 market crash?  Absolutely.  Did it resemble 1929?  Not at all.  It was one day in 1987 history.

That was 30 years ago, and the DJIA was at 22,405.09 through quarter end.  We just completed the ten-year anniversary since the market peaked on October 9, 2007.  Optimism has increased as the markets have risen.  Themes have changed but investors still worry.  The key to lessening concerns is preparation.  Investors need to understand what they can and can’t control.  Taking profits while the market is advancing allows investors to capitalize on staying fully invested in their diversified portfolio, while putting away profits for future use and needs.  It is important to know where opportunities exist; what you do during a market rise or fall makes money over the long-term.

We continue to believe in and implement our 30 plus year philosophy that a well-diversified portfolio works over the long-term.  We allocate portfolios relative to needs, not whether a new record index has been reached.  Through our meetings and discussions, we have structured your asset allocation to help offset some of the downside when it comes by lowering your equity exposure.  We have strategically taken profits to protect and provide for future needs.  This philosophy and implementation has helped our clients during their accumulation phase, distribution phase and, most importantly, given them peace of mind.

We welcome your input and questions as we close out the final quarter of 2017.   Thank you for your continued support and confidence in our investing philosophies.


Thomas L. Menzel, CFP®                                            
President/Principal Owner  
Natalie Sherman, Business Reporter, New York BBC News August 2, 2017, “US markets are rising-so why are some people worried?”

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