The market has retreated about 5% from recent highs.  The primary concern is whether the steep fall in oil prices is a sign of a weakening global economic outlook. European and emerging market economies cannot get traction and the fundamental outlook is not improving near term. Russia’s economy and currency are being devastated by the severe drop in oil prices.

The domestic economy, on the other hand, is doing well and seems to be creating some momentum.  GDP over two consecutive quarters has not been at current growth rates in eleven years. The most recent non-farm payroll report for November revealed over 320,000 new jobs.  The job market has rebounded with force in 2014; on pace to see the greatest job growth since 1999.  Though probably not sustainable near term, these are boom time type numbers as opposed to simply “good”.

Most experts expect oil prices will stabilize soon and that lower prices actually will help fuel economic growth across most sectors.  For the consumer, lower gasoline taxes are like a tax cut that potentially adds significantly to consumer spending moving forward. Joe Petrowski, an ex-big oil CEO says, “There’s nothing better than lower oil prices for the stock market and the U.S. economy,” he added. “I think we’re about to go into a golden period not unlike the 1940s and 1950s when energy prices to GDP were similar and we had rapid growth and a rapid appreciation in equity prices.”  Lower oil prices could add a half a percent to economic growth for the U.S. and many other developed countries.

Though we have hit another period of market turbulence with days of extreme volatility, we believe similar to mid-October, the dips will continue to be an opportunity rather than a reason for broader concern.  The S&P500 and Dow were up for seven straight weeks.  A pause here regardless of the reason should not be unexpected. Corporate earnings growth for 2015 is estimated at 8-9%.  With earnings valuations still at historically average levels, we remain bullish intermediate to longer term.  The fundamentals remain sound.

Finally an interesting statistic: Since 1986, when the Volatility index spikes more than 34% above its monthly low on any given day in December; all 52 times this has occurred, the market closed the month higher.  Santa Claus rally….maybe there is still time!