We wanted to write this quick note to you to let you know that the turmoil in the markets since the beginning of the month and specifically over the past week has not gone unnoticed. We have been closely monitoring the rollercoaster ride. At this point, we believe that the current pullback does not accurately reflect the market fundamentals and strength. In addition, you will likely recall that October is historically a very volatile month, especially in years with mid-term elections.
The Nasdaq index (which predominantly tracks technology stocks), is having its worst month since November 2008. November 2008! If you remember, this was a period of time when the whole financial system was failing and coming apart at the seams. Banks were failing and massive layoffs were taking place. Contrast that economic backdrop to today. To be sure, there are some legitimate concerns that we have detailed in previous letters. This earnings season has been disappointing, global growth has been weak and China and Italy are still in the news. None of these are factors that did not exist last week, however.
We believe that this is more than likely a temporary correction, versus the start of a prolonged bear market. The process of the market finding its bottom could, however, still take some time and there could well be more pain ahead, at least in the near-term.
While understanding that this is a normal part of the cycles in financial markets is rational on one hand, we understand that it does not make it any easier to watch your account balances go down. As always, our approach is always one of conservatism and seeking to avoid large losses through diversification. If we see warning signs that any drastic steps need to be taken you can rest assured that we will take those steps, but for now, we suggest staying the course and weathering the storm.
If you would like us to review a specific investment account for you to ensure that you are appropriately allocated and protected, we would be happy to do that. Feel free to reach out anytime.