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4th Quarter Market Commentary

Staying the Course in Uncertainty

Puzzled
As an investment professional who observes financial markets and thinks about the market direction every day (yes, even on weekends and vacations), I remain puzzled when clients become anxious and want to pull out of investments.

But the urge to “not lose money,” is both rational and basic human nature! When market values are down it is cause for concern. So, why should one “stay the course?” In other words, why remain invested even when markets trend downward or experience a correction?

(Definition of Correction: A correction is generally agreed to be a 10% to 20% drop in value from a recent peak.)1

The simple answer is a correction is not a crash nor a bear market. That is, while a 20% reduction in value may be painful, the loss is regained in a few weeks or months. That is true! Nevertheless, when one sees thousands of dollars evaporate, it can be quite disturbing!

Percent is the Key
So, when watching your portfolio, think percentages. If the value of your investments is down 5% or 10%, it may be no more than a normal dip in the increasing value of your portfolio. However, if you have an account with $500,000—a drop of 5% or 10% in dollar value is $25,000 or $50,000! Ouch! When you think in dollar terms, you are thinking of a nice new car vanishing! Or a long-awaited vacation that will never happen now. It’s easy to let your mind go there.

But that is a fool’s errand. If you wait, the car can reappear in your driveway. And the tickets for that great vacation will show up in just a few weeks. Imagine a portfolio of $1 million. A 20% “correction” is $200,000. Maybe more than you spend in a year! You have a right to feel robbed. “It’s like it came right out of my wallet!”

The Cure
However, when this happens step back and take a good look at what is happening. The last week of the Third Quarter 2021 was dismal—The S&P 500 was down 2.19%.2 Some people complain that the entire quarter was terrible. However, for all the volatility in the quarter, the 3rd Quarter ended higher by 1.15%.2 Moreover, business profits this year have been spectacular. As one market analyst said, “Everybody is making money!”3 Year to date, the S&P 500 is up 17.26%.2 For one year, the S&P 500 index was up 30.79%2 at the end of the 3rd Quarter 2021!


So, these are exceptionally good times. Hopefully, you are enjoying some of the great gains that are happening. While you may have a more diversified portfolio and are not getting index-like returns. You are likely doing very well.

At HARRIS & ASSOCIATES we work hard to lower volatility and make gains over the long term. If you are in transition, have experienced new-found money or feel ignored by your current advisor, contact us for a free consultation. And, you don’t have to become a client. If we can provide substantial value for you, we will let you know. Either way, you will benefit from the conversation. So, reach out today and schedule an in-person or virtual review. 

Most Sincerely,

 

 

David L. Harris, PhD, ChFC, CFP®
Wealth Advisor 
HARRIS & ASSOCIATES

A Registered Investment Advisor

(310) 318-3700
www.harrisadvisory.com

1  https://www.forbes.com/advisor/investing/what-is-market-correction/

2 JP Morgan, Weekly Market Recap, October 4, 2021

3 Dr. David Kelly, “Guide to the Markets” webcast, October 4, 2021 11 a.m. EDT.

IMPORTANT DISCLOSURES:

Harris & Associates is a Registered Investment Adviser. This commentary is solely for informational purposes and not a solicitation to invest. The results reflect the deduction of fees and the reinvestment of dividends and other earnings. 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. The performance is based on the strategy described above involving selling equity assets, gathering cash and hedging portfolios with inverse ETFs in an effort to combat sliding markets. 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. More information about Harris & Associates including our investment advisory fees are described in Form ADV Part 2 available on the Investment Adviser Public Disclosure website. Please contact a financial advisory professional before making any investment decisions.

[If you would like a free consultation, call for an appointment, or book your meeting on-line at www.harrisadvisory.com. It is always free and without obligation.]