gmhTODAY 21 gmhToday Aug Sept 2018 - Page 101

A Welcome Back Volatility fter experiencing very little stock market volatility in 2017, global markets have been on a bit of a roller-coaster in 2018. Markets climbed higher in January as investors were excited about higher corporate earnings and the potential for the recently passed U.S. tax cuts to spur economic growth. Then, in February, dropped -10% in about a week’s time as interest rates moved higher on concerns of rising infl ation. But, just as quickly as the market dropped, it recovered most of the lost ground. Then, in mid-March, investors were worried that the potential of a global trade war would slow business activity and the economy, and the markets declined -5%. If one thing is clear from this up and down movement, volatility is back. Of course, we don’t like it when we see our investments go down, but volatility is a normal part of investing. Let’s look at this in more detail using the chart as our reference. Each orange band represents a period when the stock market experienced a sizable decline, either a full market correction (when the stock market declines -10% from a recent high) or a minor correction (when the stock market declines -5% to -10%). S&P 500 Index & Market Declines January 2008 to March 2018 Source: Morningstar. Orange bards indicate decline of 5% or more. Past performance is not indicative of future results. Standard & Poor's (S&P) 500Index is comprised of 500 large U.S. stocks. Indexes are unmanaged baskets of securities that investors cannot directly nvest in; they do not include advisory fees or other investment expenses. By Daniel T. Newquist, CFP®, AIF® Daniel T. Newquist, CFP®, AIF® is a Principal Wealth Advisor with RNP Advisory Services, Inc., in Morgan Hill with over 20 years experience advising clients on their personal wealth and business planning needs. Investment advisory services offered through RNP Advisory Services, Inc. – a registered investment advisor. Securities offered through Securities America, Inc., member FINRA/SIPC. RNP Advisory Services and Securities America are separate entities. The Invest- ment Fiduciary standard of care applies to advisory services only. dnewquist@RNPadvisory.com or call 408. 779.0699. There have been 13 market corrections that ranged from -5.1% to -19.4% since the Financial Crisis of 2007-2008. That averages out to 1.4 corrections per year, which is little higher than the historical average, but not too far off. The point that is important to make is we shouldn’t be overly scared of volatility. Sometimes volatility is just volatility and it doesn’t always mean we are headed for a bear market or an economic recession. In fact, when we focus on the blue line, despite all the declines and all the volatili H][\ܜXY]\HYX\۝[YY[ݙHY\و\K][]H\HX\ۈ[ݙHY\%ܛ [ݘ][ۋܙX]\YXY[K[ ܈[\ݙYXۛZXۙ][ۜ\H\X[HH][ܘ\Z[Y\X\%]][]H\H\Xو]ܛ H[]HX\H^Z[]\[]\\H[]Y ]\\H[[\Y[\Z[H\H[] YH[[HH]^Y]\]›ٙ\HYYH[[\]HH][]H]Y\[ۙ]] ][[H[HܜX[ۈZ\‘\ ۸&][Xˈ[\\H][\ܚY[[[\Y[ؚX]H܈[\ܝ[œ[YK][Y[\ܝ[YHX\]\Y[][YH\˜H[YH]Y][\ؚX]H[[\H[\ܝ[]YH\[\X]KHܜX[ۈ\H[Z[\ˈۛH[\x&\Y[H[[Y[[[H[[[\Y[[Hۈ܈[[\[\Y[ؚX]K\]XZH[H[ \\][[YX][H]\YYYܝ[\H[[^HX[YH][]H[YH]X\]ܜX[ۜˈ][YX][H]\YYYܝ[H[[Z]Y]HB\\X]Y][K[\H[\[HXYX][ˈ[ ][HZ^\Hق[ۙ[X[YHHݙ\[][]H]Y\Hؘ[XۛZXX\˜[][ˈ]\YX][ۈ\H\[Y\Y\X][KܙX]\[Y\[š[ܙX\H[[YHݙ\[YKX\HܙX][[]H^H[[ۈݙ\Hۙ[SH8(SԑSS8(SPTSUQT TSPT NZ^KBL