Stocks Crumble-Thoughts

Friends 

Well, I would like to say “that was fun” but it wasn’t. We went on a roller coaster ride in stocks today that we haven’t seen in years. After a 250 point initial drop in the Dow at the open, stocks recovered and fought their way back to breakeven by mid-morning. But then things began to fall apart, and after breaking the 50 day moving average stocks plummeted. As the afternoon wore on, algorithms kicked in and sent stocks tumbling hundreds of Dow points in just minutes. At the worst, the Dow was down more than 1600 points only to recover half of that in just minutes. Over the last hour stocks continued their slide. We are finally getting all the volatility that we have been missing. 

We have been nervous about the ease of the advance in stocks lately, and have noted that a cooling off period was needed. Well, in less than a week (mainly the last 2 days) we basically have erased the gains from January. We have been concerned about the growing complacency of investors, but I’m guessing today’s action will get everyone’s attention. 

By the close, the Dow Jones Industrial Average was down 1,175 points to finish the day at 24,345. The S&P 500 was down 113 points to close at 2,648. Gold was up $3 to trade at $1,341 per ounce, while oil was down $1.71 to trade at $63.74 per barrel WTI. 

Again, the economy is good. Corporate earnings are good. On days like today none of that matters. In the long run all of that matters- a lot. Folks, I know I have sounded like a broken record in our in person meetings over the last few weeks, but we knew something like this was coming, we just didn’t know when. What does this all mean for us? We don’t change a thing. Volatility is the price of admission to get on the ride that takes us down the road to financial success. Recently, market participants were beginning to believe that the ride was free. It’s not free, but worth every penny in the end. 

Try to have a nice evening everyone.

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