After multiple record high-days, the S&P 500 dipped on Thursday and came back to finish the week strong, reaching another all-time high on Friday. Initial jobless claims increased at the same time there is a record high number of open jobs. At the same time, investors are becoming skittish with all these record highs, with the Chicago Board Options Exchange, or CBOE, Volatility Index spiking over 40% from the prior week.
If you’re a baseball fan, you’ve probably said a batter is due for a hit. The statistical version of this is regression to the mean. And in plain English, it means things tend to follow the average. If a batter is batting .330, meaning he gets a hit about a third of the time he’s at bat, and he struck out the last two at-bats, the average says he’ll get a hit the net time he’s up.
Given this line of thought, we’re due for a correction. A correction is when the market dips for a short period of time during an overall bull market. Remember, a bull market is an up market, because a bull’s horns go up when he charges. In the market, the intra-year low is always lower than the overall return for the year. And we have not had a significant correction in quite some time.
At the same time, we still believe the market’s current bull run will continue for a little while. Demand is still present, bond yields are low, there is still plenty of room or “slack” in the economy, and company fundamentals – margins, profits, leverage – are strong overall. Your portfolio needs to reflect your goals, time horizon, and risk tolerance, but overall, we are bullish and leaning towards a higher equity (or stock) positions than normal.
If you’ve been looking at your spending, and your values, the next action item to take is to set a few goals. You’ve figured out what’s important to you, now put some numbers to it. If you want to pay down debt, take a trip, save for college, whatever the goal, write it down. Put a chart, a picture of a thermometer, something, on your refrigerator. Every time you make a conscious decision not to spend money on something that doesn’t align with that goal, transfer the money to your savings account for that goal, and color in your picture.
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Securities offered through LPL Financial, Member FINRA/SIPC. Investment advice offered through Great Valley Advisor Group, a Registered Investment Advisor. CovingtonAlsina and Great Valley Advisor Group are separate entities from LPL Financial.
All performance referenced is historical and is no guarantee of future results. All indices are unmanaged and may not be invested into directly.
The opinions voiced in this show are for general information only and are not intended to provide specific advice or recommendations for any individual. To determine which strategies or investment(s) may be appropriate for you, consult with your attorney, accountant, and financial advisor or tax advisor prior to investing.