Never any fun but necessary!
We have obviously seen a short and quick decline in worldwide equity markets during the month of February. If you have heard us over the past months, and for that matter years, we have been preaching caution as the markets have reached one new high after another. When these events take place, everyone spends lots of time speculating and analyzing why.
In our view, the why is quite simple. Markets do not go straight up. As the old saying goes, it’s two steps forward and one step back. We have been in a 9-year bull market that had risen approximately 295%*. This run has been highlighted by an almost uninterrupted break over the past 15 months. As we have communicated in the past and shown in charts, the market on average has a 14.5% decline every year!* Most of those years end positively. It has been quite some time since we have had a pullback at all.
At this point, our “deep” analysis says the market is just letting a little of the speculative air out. Even though we never like it, this is better than an uninterrupted bubble that ends in greater pain.
Give us a call if you would like to talk further.
*Source: JP Morgan