We remind our clients to be patient as market volatility continues to persist since the beginning of the 4th quarter. The market weakness has primarily been the unwinding of momentum in the technology sector and the inability for the financial sector to perform.
The underlying fundamentals of earnings growth, valuation, liquidity and the cost of capital, along with other economic statistics, remain sound. In time, fundamentals always win. Most of the market volatility has been technical in nature against a backdrop of some of the best economic conditions in decades.
So why be patient? Market corrections are no fun but, as humans, the emotional decisions we make are typically not the best decisions in hindsight.
We also encourage patience based on this historical data:
During the 4th quarter of mid-term elections, the market has averaged over a 7% return since 1946. What is more interesting is that from September 30th through June 30th of the following year, the market has been up 100% of the time after mid-term elections over the last 72 years.
Only one time did the market end the 4th quarter in the red but, even on that occasion, the market was still higher from September through June the year after the mid-terms. Oh, and the average return for the S&P500 during that time frame has been 18.4%
We remain intermediate to longer term bullish. In addition to strong fundamentals, we are entering the time of year that has traditionally been strong for equities.
Thank you for your confidence and trust. We continue to believe patience will be rewarded as it has many times since this economic expansion began. Stay tuned!