Wealth of Insight

What a day we had yesterday. We wanted to take a quick moment to address the recent selloff and our thoughts on the market.

After the decline today, the S&P and Dow are just below even on the S&P. The international markets are down 10% to 15% and bonds are down about 2.25%. On the other hand, S&P earnings are up 25% YTD and 3rd quarter earnings are still coming in strong. Emotions are running high and the geopolitical environment is not helping anything. Ironically, the strength of the economy is leading the Fed to continue to raise rates which causes angst for the markets despite the fact that a strong economy drives earnings higher.

Bottom line, the valuations of virtually all markets around the globe are now significantly lower than they were at the start of the year. Here at home the S&P 500 is now trading below 16x forward earnings (The 25-year average is 16.1x). The market is trading down, valuations are lower, and this is with a strong economic background and an expanding GDP. Leading indicators are still at high levels and consumer spending and confidence are holding up well. We believe this is just a normal selloff. Just as we got overdone on the upside we are overdone on the downside now. The computerized program trading is exacerbating the situation as well.

Our portfolios have been holding up nicely and are well positioned to weather this type of volatility. We are monitoring the situation closely as you would imagine but my intuition is this will pass, and we will start trading more in line with the earnings growth sooner than later. We are watching the economic indicators/numbers closely. This is not a time to panic or make wholesale changes. As always, rest assure we are actively monitoring all our investments and if we have the opportunity to improve our situation we will take it.

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