February is for falling….in love?
February is a month that always reminds me of falling in love…Valentine’s Day smack in the middle of the month, and I got married in March, and my husband’s birthday is in February, so it’s all about love, and falling in love. But this February has had a different kind of “falling” feeling in just the first week…the stock markets.
According to colleagues who research such things, the S&P 500 gained +5.7% (total return) in January 2018, the index’s 15th consecutive “up” month. This number of consecutive “up” months has only been achieved once before for the S&P 500, between March 1958 and May 1959. So perhaps not surprising that falling prices – even a 10% correction – could result in the first “down” month for the S&P 500 in the month of February, 2018.
Even still, those same colleagues tell me that the S&P 500 has gained +10.1% per year (total return) over the 50-year period of 1968-2017 despite 7 bear markets - at least a 20% decline each time. To me, that demonstrates durability. Love it or hate it, the stock market is - so far in its history - durable, weathering depressions, recessions, war time, peace time, administrations stable and not-so-stable, reflecting the value of capital in our economy. Of course, this is no prediction of future results.
Some folks felt that the drop in market value in the past week on all indices meant it was time to “go to cash” or “get out” of the market. My advice? “Not so fast”, because how do you know when to get back into the market? Staying in cash means not only eroding purchasing power due to inflation (which is predicted my many to be increasing from historic lows), but potential for lost opportunity, the “cost” of not being invested, should the market improve.
Or course, it’s always best to get advice from your financial advisor before making any changes in your financial plans or investment strategy. Talk through your options with a professional who knows your goals and risk tolerance. And let’s remember to keep February about falling in love.