Market Volatility

We are postponing the publication of our Market Update by a day to address the recent market volatility this week.

The market opened this morning with a bad hangover, dropping three hundred points on the Dow before the official open.  By midday that market was down over 3%, on top of a miserable start to the year in which we are already in correction territory (down 10% from the recent highs).  Put this on the heels of a rocky and lifeless 2015, and people are understandably worried.

This current market has fallen below the levels we saw in August and September of last year, when fears of an actual collapse were circulating.  Now that we are past those levels, the question arises as to whether this slide will continue.  Are we about to experience another 2008 with a halving of the stock market?

While I am the first to admit that this market has us worried – energy prices are dropping without an end in sight and China continues to drag down global markets – I am also optimistic.  The data continues to be very strong in the U.S. and many of the factors driving down this market are grossly overstated.  We are also seeing signs of calm in this volatility with the VIX remaining in the 20s, a relatively benign level showing the mindset of institutional traders.

If this plays out as expected, we are seeing a good buying opportunity for stable companies as we head into a slower growth period in the U.S. and abroad.  We do not expect to see equity returns of the magnitude of the past few years, but there are modest amounts to be made in this environment.

This and plenty more will be covered in our Market Update tomorrow.

David