Do you know how to make a pencil?

Our family's Spring Break trip to Florida in 2000 took place during the infamous dot-com bubble burst. I can vividly remember my dad's reaction to the news of the bursting of the tech bubble. He had some of his portfolio (I'm not sure how much) invested in dot-com stocks via the Nasdaq Composite Index, which declined by 25% that week of our Spring Break. It ultimately took 15 years for the Nasdaq to get back to its high from the year 2000.

These past few weeks have seen extreme stock market volatility, the WHO declaring a pandemic, and the U.S. implementing travel restrictions and many other measures (with more to come, assuredly) to help combat the spread of the COVID-19 coronavirus.

Amidst the politically-charged climate in which we live, we can lose sight of the progress mankind has made over time. We often remind our clients the U.S. stock market has handsomely paid patient, long-term investors over time. One simple method for gauging economic progress over time is to consider the evolution of the largest publicly-traded companies in the US. Of the ten largest companies in the US today, only four were founded prior to 1970 (JPMorgan Chase; Johnson & Johnson; Procter & Gamble; and Visa).

The bull market lives on. This bull market had near deaths in 2011 and 2018 – each time narrowly escaping the 20% decline threshold that defines a bear market (and thus ends the bull market).

One of the most important rules of investing is this: tuning in to media sources (be they financial or general) will not help you be a better investor. In fact, it will likely make you a poorer investor. Does it help you to know how much the Dow or the Nasdaq moves in a given day? If the Dow is down 200 points today, will that alter your investment strategy? Will it alter your mood?

As a part of The Wealth Group’s systematic investing process we have developed and refined, we update and review your portfolio and the internal holdings on a regular basis. This is an update based on that process, and there is no action required on your end.

Stock market drawdowns are normal. They’re never fun, but they are a routine occurrence. As of market close on October 11, 2018, the S&P 500 Index was only 6.9% off its recent high from September 20.

The danger of watching or listening to the news is that you might miss all the reasons to be optimistic. You may not hear the media tell you that small business owners are more optimistic than ever (at least dating back to the 1975 inception of this poll).

Friday, March 9th marked 9 years since the US stock market bottomed during the Great Recession of 2008-2009. We have witnessed excellent stock market and economic growth since those dark times, leading many people to ask the question: “How long can this expansion/rally continue?” Before we answer that question, a short stock market history lesson is in order. While the US stock market has in fact rallied an incredible 380% since the stock market bottom (as measured by the total return of the S&P 500 Index), it has not been without significant drawdowns: From July 7, 2011 – October 3, 2011, the S&P 500 Index lost 18.4%. During that same time period, the global stock market (as measured by ticker ACWI) lost 22.5%. From May 19, 2015 – February 11, 2016, the S&P 500 Index lost 12.8%, while the global stock market was down 19.1%. So, there have been “breathers” (that’s a nice way of putting it) during this period of sustained economic and stock market growth. In other words, we have taken our lumps along the way.

Quiz question: when was the last time initial jobless claims were as low in the U.S. as they are today? Answer: 1969. Think of that: by this metric, it’s been nearly 50 years since the U.S. labor market was this strong. The headline unemployment rate has been steady for a few months at 4.1%. The initial jobless claims report is released weekly by the U.S. Department of Labor. “This report measures the number of jobless claims filed by individuals seeking to receive jobless benefits.” The latest reading came in at 210,000:

As I write this, it looks like the U.S. stock market (as measured by the S&P 500) will finally get something that happens, on average, about once a year: a 10+% percent drop—the definition of a market correction. The last time this happened was two years ago, ending in February of 2016. The drop that tends to stick in our minds was a whopper—the Great Recession drop that caused the S&P 500 to drop more than 50%--so many of us today probably think corrections are catastrophic. They aren’t. More typically, they last anywhere from 20 trading days (the 1997 correction, down 10.8%) to 104 days (the 2002-2003 correction, down 14.7%). Corrections are unnerving, but they can be a healthy part of the economy—for a couple of reasons.