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Just because something has not happened yet...

January 1, 2019 | Commentary

  • Last April, we noted in our Commentary for that month that since 1950 there had never been a year when the S&P 500 was up over the first two months of the year and the year finished with a loss.  We cautioned against following such rules. This fourth quarter was proof why such caution is appropriate.
  • The U.S. stock market peaked in September.  Despite strong employment, GDP growth, corporate earnings and a moderate inflation rate, market sentiment turned sour in Q4.  Selling momentum built rapidly in December after the Fed did exactly what it advertised, raising policy interest rates by 25 basis points.
  • Some blame the political environment.  Others say the market is just anticipating an economic downturn in 2019.  The stock market has a long history of predicting recessions that never occur.  It is not comforting to be reminded that surprising volatility is an ever present risk to the long-term investor.  If it were not, we would all earn the risk free rate on our stock market investments.
  • We know that markets reflect the intersection of emotion and analytics, but fundamental factors eventually guide sentiment appropriately and the market follows.  Stocks are valued today below historical averages.   Long-term investors who decide to sell and lock in their losses since September will be following the current sentiment of the crowd.  Offit Capital still believes in the long-term American and global growth stories and encourages everyone it advises to stick to their asset allocations.

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