We were in a drought of historic proportions. Restaurants no longer offered water with meals. Washing a car in the driveway was forbidden. Yards were brown from watering restrictions. Farmers were not allowed to irrigate crops. “Lakefront” homes were now Lake “View” homes, if they were lucky. Some just had a view of weed infested valleys.
Then it rained.
And it rained…
…and it rained…
…and it rained. Baseball games were cancelled. Outdoor weddings were moved inside. BBQ plans and swimming pool openings were postponed.
Then it rained some more. It rained more in May in Austin than it ever had, at least since records have been kept.
Then came the rain bomb. It rained so much in such a short period of time during the Memorial Day weekend that downtown Austin flooded. In nearby Wimberley, tragedy struck when the Blanco River flowed out of its banks during the night leading to over a dozen lives being lost.
Finally the clouds broke and the sun reappeared. Those that were lost were mourned and will be terribly missed. The mud, muck, and debris have been cleaned up and the rebuilding process begun. The grass is now green, the lakes are mostly full, and everyone is talking about how wet this winter may be when El Niño returns.
Recently, after months of moving sideways, the storm clouds gathered over the stock market. Greece still owes more than they can repay, the price of oil has plummeted (that’s bad?), and China is figuring out the hard way that markets price assets much more efficiently than governments.
On August 17th, the S&P 500® closed at 2102. Was that thunder in the distance?
On the 18th the index lost about -5 points. A few drops hit the windshield.
Then -17 points down on the 19th. It was time to turn on the wipers.
Another -44 points on the 20th. Wipers on high.
-65 points on the 21st. Started to think about pulling over somewhere.
Then the bottom fell out on Monday, August 25th. Closing down -78 points at 1893, or about 10% below where it started on the 17th.
Why didn’t we stop under that bridge back there!?
It is very normal to wonder when or if it may stop. It is also common to believe that you should have seen it coming, that's just human nature. Fortunately, no injuries have been reported, even though many portfolios have suffered undeniable damage. It's time to be thankful for what you have, hug your loved ones, and start the repairs.
There will be no shortage of pundits claiming to have predicted this all along, or that the worst is yet to come. Just remember that the evidence shows that the vast majority of forecasters that get it right are just lucky. Furthermore, for your long term goals, stocks will earn more than cash or bonds. The trade-off is occasionally dealing with volatility like we've seen recently.
If you can’t stomach the thought of another tempest, perhaps it may be worthwhile to make some changes. You can do that by revisiting your plans, making sure the goals you set out to accomplish are still applicable, then making adjustments as appropriate. Having a good plan includes understanding how volatile markets can be, not taking more risk than you can tolerate, and occasionally re-balancing.
At ATX Portfolio Advisors, we don't try to forecast the ups and downs. We believe in purpose based investing, disciplined asset allocation, and using evidence based investing principles. We also believe in not piling on fees during downturns. If you have questions or would like to discuss your situation, give us a call.