The first two weeks of 2016 are now on record as the worst initial trading period for the US Stock Markets ever. The Dow Jones Industrial Average is now officially in correction territory as it is down 10% from its most recent high in November of 2015. The Dow and S&P 500 are down about 8% so far this year, while the Nasdaq is down more than 10%.
Worries about slowing global growth, specifically China, continue to plague the markets while oil is now down below $30 per barrel. Oil is at its lowest price in 12 years and has decreased by 20% year to date.
The markets are closed on Monday for Martin Luther King, Jr. Day and then we will have numerous companies start to release their fourth quarter results. The earnings reporting season began last week with JP Morgan, Citigroup, and Intel reporting numbers that were better than the market expected. Citigroup actually reported its biggest annual profit in nearly a decade for 2015. Strong earnings ultimately drive stock prices.
While tagged as the worst annual start to a given year ever, how do the first two weeks of 2016 compare to losses suffered by the S&P 500 and the Dow Jones Industrials during just a six day stretch in 2015? During the six-day period from August 18, 2015 through the close of trading on August 25, 2015, the S&P 500 dropped by 11.1 % and the Dow lost 10.7%. As investors with busy lives, it’s difficult to remember what happens week to week, much less how we exactly felt about the sharp double-digit declines during that brief period last August. Whatever our personal reaction was at that time, the Dow managed to erase most of those losses and rise 10% from August to the close of the year on December 31, 2015. The point is that the stock market will have some big down periods every year, but those will likely be forgotten over the course of our longer-term investment horizon.
Maybe this next week will be like the best week we saw in 2015, which was up 3.8%, or maybe it will be another down week in the stock market. Regardless, please know that we are reviewing our client portfolios to reconfirm that the investment allocation and specific securities in which we are invested is the optimal strategy in the current economic environment. If we determine changes are necessary, we will always act in what we believe to be your best interest.
Sincerely,
Marietta Wealth Management, LLC