KF Update – Market & Economic Update

Kane Financial Update – Market & Economic Update

4 Minute Read 
 
We hope this email finds you well and you are gearing up for spring (if it ever gets here!).  I wanted to send along a brief email with my thoughts on the market volatility this week.  I hope you find this helpful and if you have any questions please contact our office.

Markets & Economy 
The S&P 500 index (the largest 500 companies in the United States) has entered correction territory, down roughly 14% from its high point in February of this year.  A correction is anytime a major index drops 10% or more from its high point.  Corrections are fairly common amongst stock indexes; the S&P 500 has experienced 38 corrections since 1950, or a correction every couple of years.

A decline of 20% or more for a major index is called a bear market.  Bear markets have been more infrequent over our history, though we have had two recently in 2020 during COVID, and again in 2022 when we were experiencing record inflation.

If the market reverses course and this turns out to be a correction, since 1950 those corrections have lasted an average of around 6 months.  Corrections more recently (since 1987) have been shorter, and lasted roughly 5 months.

Bear markets are more infrequent, but also have not shown to have staying power.  Going back to 1950, the average bear market has lasted roughly 9-10 months.

The Positives
There is a reason corrections are considered healthy in the investing world.  For one, they tend to weed out speculators and return capital to long-term investors.  Corrections can help to keep valuations in line with historical norms so bubbles aren’t created.  Over the history of markets, nothing has destroyed more wealth than stock market bubbles. 

They also create buying opportunities for long-term investors; currently you can buy into the S&P 500 today for 14% less than you could just two months ago.  Finally, corrections can also provide tax savings opportunities through tax loss harvesting in non-retirement accounts.

What we are doing
I have been reviewing client portfolios for opportunities to buy into this market weakness.  Large technology companies and Russell 2000 are beginning to show opportunities within client accounts.  Additionally, we are reviewing tax loss harvesting opportunities within non-retirement client accounts.  Finally, I will continue to communicate with clients throughout any continued market volatility.

As I always say, investing is a long-term endeavor and the best thing to do is ride out these ups and downs.  Stocks will recover and reward the patient, long-term investor.

Some of my favorite quotes on investing
“The most dangerous words in investing are this time it’s different” Unknown
“The stock market is a wonderfully efficient mechanism for transferring wealth from the impatient to the patient” Warren Buffett
“Be fearful when markets get greedy, be greedy when the markets get fearful” Warren Buffett
“The true investor welcomes volatility…a wildly fluctuating market means that irrationally low prices will periodically be attached to solid businesses” Warren Buffett

Summary
This past Tuesday was my 20th completed year in this field of investment management and financial planning (it went fast!).  Over those 20 years I have been through numerous downturns, and there have been two common themes.  The first, they all begin differently which makes them impossible to predict and forecast.  An internet stock bubble, a financial crisis, a global pandemic, record interest rate increases and inflation, and now tariffs.  The second common theme is that these downturns end in a similar fashion where we adapt, markets recover, and the US economy continues to grow and thrive.

While uncomfortable, downturns are a natural and healthy part of investing.  History shows these are good times to invest if you have cash sitting on the sideline.  Additionally, you could consider increasing the stock exposure in your portfolio to further take advantage of this downturn.

We hope you find this information helpful, and look forward to seeing you all soon.
 
Best, 
Clint, Renee, & Kristi