Omega
Wisdom



Blending Life, Wealth, Work & What's Next
January 5, 2018

Dow 25,000…should you be excited or concerned??

Happy New Year! 

 

We hope you are staying warm and had a great holiday.  We are working on our quarterly newsletter and will have a fuller debrief of 2017 soon, but in the meantime, we wanted to respond to this important milestone of the Dow Industrials hitting the 25,000 this week. 

 

A couple of general points to remember:

  • The Dow Industrials is made up of 30 industrial stocks.  The Standard & Poor’s 500 is the other well-known index tracking the US stock market, and it represents 500 of the largest US stocks.  So, the Dow’s performance is not a full representation of the US stock market by any stretch of the imagination.
  • Most investors are best served by a well-diversified portfolio that includes exposure to the stock market, but is not solely focused on the stock market.  As a result, the returns in your diversified portfolio will generally trail  the performance of a single stock index.
  • What goes up, at some point, goes down…perhaps temporarily.
  • While the economy does seem relatively strong, the movement upward since November 2016 may be less based on fundamentals and more on hopes and expectations for tax reform, less regulation, and infrastructure spending.

 

So, let’s take a trip down memory lane… when I came into the financial services profession, the Dow ended 1985 at 1546.47.  At the low of the 2008-09 Great Recession, the Dow bottomed out at 6547.05.  Now, here we are at 25,000.  As you read various accounts of the US stock market’s progress since 2009, you may at times wonder why you haven’t seen your portfolio multiply like bunnies since then.  Or maybe why we haven’t had you 100% in stocks since 2009.  Well, here’s why and here’s what we think about the future:

 

  • We take a Goals-Based approach which means that we assign pots of money for each of your goals.  The shorter the goal, the less invested in the stock market, the less the return is likely to be.  Not all your accounts will be up the same amount but hopefully, they may be able to better weather the inevitable volatility the markets bring.
  • While we don’t recommend market-timing, when you invest impacts the returns you see…especially in the short-term.  If you invested in March of 2009, your returns look great.  If you were invested prior to 2009, took a hit in 2008 and then recovered from there, your returns will look different and probably lower.
  • Be sure to take a look at the Standard & Poor’s returns in 2011 and 2015.  They were barely over 1%.  So, it has not been a straight ride up. 
  • There are factors outside the US that could impact the US markets given that the major stock market indices are currently moving all in the same direction.
  • We believe in the stock market, long-term, as a place to invest for your long-term goals.  Please see this chart: https://tinyurl.com/ybhoqhhn

 

Are we due for correction?  Who knows.  Generally, things move in cycles.  While we might not see another 2008-09 stock market for decades, a 10-15% correction is generally considered possible at some point.  We continue to recommend our Goals-Based approach to match the needs for cash with an appropriate asset allocation.  If you need cash from your portfolio sometime in the next 9 months and we don’t have it set aside, please contact us.

 

And please be on the lookout for our Q1 newsletter coming out later this month where Jared will take a deeper look at the last quarter and full year of 2017.  Until then, enjoy the ride but keep your seatbelt on!

 

Sincerely,

Lisa

Comments

CONNECT WITH US

Want to know more?

Omega Wealth Management serves as a “lifeline” to help you successfully navigate major life changes. Our comprehensive and flexible process is designed to meet you where you are and help you get to where you want to go, at your own pace.

 

CONTACT US

200 North Glebe Road, Suite 730
Arlington, VA 22203

Phone: (703) 387-0919 | Fax: 703-387-0918
Email Us