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1st Quarter Market Commentary

“Successful investing is not for the faint-hearted!”  -D. L. Harris

We all know we should ‘buy low’ and ‘sell high.’ In light of the recent market slide, now you know, that is easier said than done. Let me suggest a strategy that may calm your nerves and perhaps give you some courage to feel like a professional about your investments.

The strategy is focus. Yes, what are you looking at? Our emotions and our decision-making come from what we focus on. And there is the rub.
Most of us mistakenly focus on our account balance. The knee-jerk calculation is to remember (sometimes not very accurately) our most recent highest balance and compare it to what we see today. Believe me, in the last quarter and especially in December, that was a formula for panic!
But wait. Let’s step back a bit and look at a typical example. Let’s say you fell victim to the process above, and you found that in December your portfolio was down 10.75%. You look at the S & P 500 for December and it was down 8.27%. You say, “Hey, I’m down even more than the index!” Regardless of the size of your portfolio, you see those actual dollars evaporate into oblivion. [Sigh!]
This focus can drive you crazy, especially when you let your mind conjure up visions of a pending ‘crash.’ You see your precious nest egg dropping 50% or more! “It could happen,” you tell yourself.
On top of that you read headlines that tell you, “The Sky is Falling! Markets are in for falling values.”  --Yikes!
If the above scenario seems somewhat familiar, you are not alone. In my experience this is a very common focus.

Ok, what should we focus on? How do we regain our sanity and start to think rationally about our money and our investments? Consider the following three perspectives. They may do more for you than two Valium!

First, TAKE THE LONG VIEW. By that I mean simply look back in time and see when you last had this “terrible” balance. After looking at many client accounts it seems the same balance can be seen in early February 2018 or December 2017 or perhaps as far back as July 2017. So, we are saying that from some point in the recent past you simply lost a big chunk of gains you enjoyed over the last 10 to 18 months. The world has not ended. It hurts of course. You had plans for those gains! Will you ever see them again? Is this just the beginning of your journey to the poor house? Probably not. But a focus on the long view helps us see we are still in the game.

Ok, while the long view may help, we can still fall victim to our fears. The long view doesn’t really help our fearful mind from imagining the worst. We need more.

The second perspective is to LOOK AT THE ECONOMY. What is happening with employment, corporate earnings, Gross Domestic Product, productivity and such? Is the economy hitting the skids? Are workers about to be laid off and commerce grind to a halt? Sometimes there are indicators that suggest bad times ahead. But, not now!

As a matter of fact, the economy is surging quite nicely. Unemployment is expected to continue to fall, perhaps a low as 3.3%.1  --A number not seen since the 1950’s! Analysts estimate corporate earnings may sag in the first quarter but continue to increase through the rest of the year, and profit margins are expected to continue to climb past 12%.2  Real GDP is projected to be 3% year over year.3  And, we could go on.

Suffice it to say, the economy shows no signs of being in the tank. Just ask yourself if you could find a parking place when you did your holiday shopping? When holiday retail sales are reported, in-store and on-line sales are expected to be exceptionally good.

So, if the economy is doing so well, why is the stock market falling? UNCERTAINTY.  There is nothing that rattles investors more than uncertainty. If you recall, we have had headlines, Presidential Tweets, and Congressional squabbling. There has been a perfect storm of unsettling news –from threats of trade wars, terrible disasters, and now a government shut-down. We have had a veritable Smorgasbord of distressing uncertainty!

Ok, so the falling stock market may be baffling in light of a growing economy. How do we find more solace while we watch our account balance fall?

The third perspective is, VALUATION. Are market values high or low? To answer that question, we look at something called the Price-Earnings Ratio. At 14.4x the current S & P 500 P/E Ratio is well below the 25-year average of 16.1x. So, it appears valuations are relatively low. This means good companies can be bought at bargain prices. In a growing economy it means stocks are on sale!

As a matter of fact, three economists at First Trust think the market is poised for huge gains. They say in their Monday Morning Outlook from December 31, 20184, “we expect a soaring bull market, with the S&P 500 reaching the 3100 we projected for 2018 a year ago. Yes, we know that sounds bold, but our Capitalized Profits Model is screaming BUY.”

They conclude saying, “Yes, this is likely to be one of the most optimistic forecasts you see, if not the most optimistic one of all. But, in the end, we do best by our readers when we tell them exactly what we think is going to happen, without altering our projections so we can run with the safety of the herd. Grit your teeth if you have to; those who stay invested in the year ahead should earn substantial rewards.”

Ok, that may be one view. But, even if these economists are only half right, the fact remains stocks are at low values and the economy is growing very nicely.  Remember the basic rule of investing: ‘buy low’ and ‘sell high.’

Unless you are planning on spending all your portfolio in the near future, this is a time to buy low and relax. Stay the course despite the volatility. Rest assured, irrational pessimism will pass.



David L. Harris, PhD, ChFC, CFP®
Wealth Advisor & Personal CFO

(310) 318-3700


1 Wesbury, B., Stein, R., Elass, S. (2018). Dow 28750, S&P 3100. First Trust Monday Morning Outlook. Retrieved from,-sp-500-3100
2 JPMorgan Chase & Co. (2018, December 31). Guide to the Markets® U.S.| 1Q 2019 | As of December 31, 2018, p 7. Retrieved from
3 JPMorgan Chase & Co. (2018, December 31). Guide to the Markets® U.S.| 1Q 2019 | As of December 31, 2018, p 20. Retrieved from
4 Wesbury, B., Stein, R., Elass, S. (2018). Dow 28750, S&P 3100. First Trust Monday Morning Outlook. Retrieved from,-sp-500-3100

Harris & Associates is a Registered Investment Adviser. This commentary is solely for informational purposes. Advisory services are only offered to clients or prospective clients where Harris & Associates and its representatives are properly licensed or exempt from licensure. Past performance is no guarantee of future returns. Investing involves risk and possible loss of principal capital. No advice may be rendered by Harris & Associates unless a client service agreement is in place.

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