Rosenbaum Financial Services

(732) 441-1818

A Reminder of Why It's Important to Take a Long-Term View

Why the Last Two Days are a Good Reminder of Why It’s Important to Take a Long-Term View

As you have likely seen in the news, over the last two market days the Dow Jones Industrial Average (DJIA)i declined 7% over the last two market days. However, it is important to remember that even after the last two days, the DJIA is up 20% over the last year; a great year by historical standards.

What has driven the recent drop? From my perspective, there are three factors:

  • Investor profit taking. Given the appreciation U.S. equities over the last few years, some investors may be existing positions to realize profits.
  • Trading algorithms. As traders’ use of trading algorithms have become more commoni i, declines in a market can have a ripple effect and even exacerbate declines in other markets.
  • Anticipated Federal Reserve rate hikes. Strong wage and jobs growth, while signs of a strong economy, also signal that the Federal Reserve may increase the Fed funds rate to prevent ‘overheating’ which can contain economic growth.

Looking forward, there are two primary reasons why we remain optimistic:

  • History. This is not the first time we have seen this. Since 1987, there have been six instances where the DJIA has declined by 7% over a two-day period. In those six instances, the market on average increased 7% over the next 12 months.
  • Strong US economic fundamentals. Based on recent jobs growth, wage growth, and unemployment of only 4.1%, we believe the US economic outlook remains positive.

While we remain positive about the outlook, the last few days remind us that the market can be volatile, and that it is important to take a long-term view and stay the course.

Should you have any questions please reach out to your HD Vest Advisor.


James Hickey

Chief Investment Officer

HD Vest

The views and opinions presented in this article are those of James Hickey and not of H.D. Vest Financial Services® or its subsidiaries.

Securities offered through H.D. Vest Investment Services®, Member FINRA/SIPC, Advisory services offered through H.D. Vest Advisory Services®, 6333 N. State Highway 161, Fourth Floor, Irving, TX 75038, 972-870-6000.

Investments in individual sectors may be more volatile than investments that diversify across many industry sectors and companies. Certain sectors of the market may expose an investor to more risk than others.

iDow Jones Industrial Average is unmanaged and measures broad market performance. It is not possible to invest directly in an index.

i iInvestopedia, 2015

Share |
 

Related Content

The Real Cost of a Vacation Home

The Real Cost of a Vacation Home

What if instead of buying that vacation home, you invested the money?

Best Performing Asset Classes

Best Performing Asset Classes

Bonds may outperform stocks one year only to have stocks rebound the next.

5 Smart Investing Strategies

5 Smart Investing Strategies

Getting what you want out of your money may require the right game plan.

 

Have A Question About This Topic?







Thank you! Oops!

Asset Allocation

Consider how your assets are allocated and if that allocation is consistent with your time frame and risk tolerance.

Global vs. International: What’s The Difference?

International funds invest in non-U.S. markets, while global funds may invest in U.S. stocks alongside non-U.S. stocks.

Investing with Your Heart

For some, the social impact of investing is just as important as the return, perhaps more important.

View all articles

Contributing to an IRA?

Determine if you are eligible to contribute to a traditional or Roth IRA.

Impact of Taxes and Inflation

Estimate the potential impact taxes and inflation can have on the purchasing power of an investment.

Saving for College

This calculator can help you estimate how much you should be saving for college.

View all calculators

Keys to Investing for Retirement

There are some key concepts to understand when investing for retirement

5 Smart Investing Principles

Principles that can help create a portfolio designed to pursue investment goals.

5 Smart Investing Strategies

There are some smart strategies that may help you pursue your investment objectives

View all presentations

It Was the Best of Times, It Was the Worst of Times

All about how missing the best market days (or the worst!) might affect your portfolio.

What Smart Investors Know

Smart investors take the time to separate emotion from fact.

Should You Invest in Exchange Traded Funds?

There are hundreds of ETFs available. Should you invest in them?

View all videos