Discussing the recent market downturn and the typical intra-year volatility seen
January 24, 2022
Welcome to Wealth Enhancement & Preservation’s Market Minute, where we get to update you on everything that happened in the financial markets this past week. My name is Jake Sanders, and I am a partner at Wealth E&P and operate as a Wealth Advisor and Certified Financial Planner. I hope that you had a great week and weekend, and if you're in the South like we are, that you're at least trying to stay warm!
Last week, we saw a continuation of what has been a “down month” for the markets in January. All three of the major indices ended down; the DOW was down 4.5%, the S&P was down almost 6%, and the NASDAQ was down 7.5%.
Now, we are firmly in correction territory for two of these three indices, with a correction being defined as a 10% drop from the top to the bottom. The third index, the DOW, is close to that. As we write this, if the action continues, we might see that by the end of the day.
What does that mean for your portfolio? Three of our models have moved to more defensive positions; our Relative Strength, Economic, and Dynamic models have made defensive trades. If you're a Wealth E&P client, you will see those. If you have questions, please give us a call and we'd be more than happy to discuss them with you. I wanted to add some perspective with that, as you can see below.
If you've come to any of our events, you've probably seen this before. This graph shows intra-year market declines going back to 1980. The math isn't done on this chart, but if you were to average them out, the average intra-year market decline is about 14.5%. That is a decline from the top of the market to the bottom. Last year was the exception, where we only saw a drop of 5% from the top to the bottom. We've obviously already seen that in 2022, with a pretty significant decline to start the year.
What's the point of this? We think it's important to maintain perspective and ultimately to follow a process. Here at Wealth E&P, we have a very clearly defined process. We stick to it, we make trades where necessary or when we're prompted, but we always follow that and maintain this perspective.
If you have any questions about that, or want to find out more, we'd be happy to talk to you. Please feel free to reach out or visit www.wealthep.com. Otherwise, stay tuned for our Market Minute next week! We hope you all have a great day.
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