In the last month, especially early on, I had several calls from friends and associates who wondered about the markets. Given the autumn of 2018’s pummeling and especially December’s mauling, I heard, “Should I get out?”
I told my panicked friends, “I don’t know what’s ahead. I don’t know why the market has been hit so hard. I doubt this will continue. but if you can’t sleep at night, you may have to sell. But as for me, and what I think is fair advice, do nothing.”
Well, January is over, and what a January it was after the worst December since 1931, a year in which 2291 banks failed, and we sat in the depths of the depression. What did late 2018 have to offer the investing public to rival the dreadful markets of Dec. 1931? Nothing! Absolutely nothing, except for a massive helping of fear and panic.
Take a look at this chart, below. It’s from Bespoke Investment Group. It shows where the performance of the first 21 trading days of 2019 fit in trading history with those same dates since 1928. Read it as a running cumulative standing chart. In other words, on the 2nd trading day of January (January 3), 2019 was in 87th place of all years since 1928. Yet, by the last trading day of 2019, the 21st trading day, January 31st, 2019 was off to the 7th best start to a year since 1928.
Markets do that.
But no, we are not now guaranteed a great year for the rest of 2019. But some of the excesses of late 2018 are being ironed out.
What this all tells me, again, is: (1) have a diversified, equity-oriented portfolio, (2) set your asset allocation based on who you are and the emotional system you have. It makes no sense to have too much stock when a rough patch comes and you sell out at a market bottom, and (3) stay the course.
God bless us all.