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Open Letter to Investors After a Rough Day


October 11, 2018: Yesterday was not much fun on Wall Street, Main Street, nor on Your Street. The Dow-Jones Industrial Average (DJIA) lost 831 points, closing at 25,598. Moreover, the previous couple days weren’t that much fun, either. What’s up with that?

I took a little stroll in the financial park today, just to regain some orientation, and was intrigued by my findings. The first tidbit came from a 1-year look-back on the DJIA, which yielded an interesting number – 22,779. A little simple math shows that the index has gained 2,819 points (12.37%) in exactly one year. That is above the average annual performance for the past 100 years.

So why does it feel so bad, you might ask? Several of you have actually done just that, and we felt that a response was warranted. After all, we are in the market personally, just like you are. 

Let’s look at some of the media hype surrounding this normal market pause. How many of you think that DJIA 26,000 is a brand new phenomenon? Would you believe that we first achieved that milestone on January 17, 2018? Look it up if you need to, in order to feel better.

Further, how many remember that in a span of two weeks (January 26 through February 7, 2018) the DJIA fell 2,756 points? This was a drop of over 10%, which is called a “correction.” The average number of “corrections” over time is one per year. We didn’t have one in 2017, so are we due for another one in 2018? We have no idea. It could happen, but this is not 2007, a year when the economy was in ruins.

Why, you might ask, is this happening? There are reasons, and there are excuses, both in abundance. None of either can be shown to have caused the sell-off. The market does what it does, without regard to our feelings, our insight, or our analysis. What matters is the driving force of market performance – the economy. Right now, we challenge anyone to find a better time in the nation’s economic history.

Logic dictates that this is a temporary, normal condition, which will soon end. Neither fun nor profitable, it is normal and healthy for the market. We suggest you take in a good movie, go for a walk on the beach, or otherwise bide your time for a while. Let the current outstanding business environment create the turnaround we need in order to feel better. It will come. We can’t say if it will be one day, one week, or longer, but we are confident that it can’t take long in this economy.

Van Wie Financial is fee-only. For a reason.

(Update – This letter was written and sent on October 11, and on that day the DJIA fell another 500+ points. On the 12th, a Friday, the DJIA rebounded nearly 300 points. This Blog is being written on Saturday, October 13, and we have no idea what next week will bring.)