Stock Market Update: Don’t Step On The Scale

Posted on Jan 7, 2016

In our last market update dated August 24, 2015 we addressed the rapid downturn in stocks at that time. Our assessment was that in order for the market to gain a better footing, three uncertainties had to be removed as we’ve noted below.

  1. The Chinese economy needed to stabilize and show growth again.
  2. The price of oil needed to find a bottom that included overwhelmingly negative sentiment.
  3. The Federal Reserve needed to raise interest rates just one time.

Removing these concerns should allow for the return of positive market dynamics, which means positive returns. Right now only one of the three criteria have been met, that being the Federal Reserve raised interest rates last month for the first time. While the price of oil is still on the decline, the sentiment around oil is incredibly negative and that leads us to believe prices could stabilize soon. Regarding China, there are also some signs of progress that their economy is not as bad as feared, but their stock market has not yet received this message.

Just a few weeks ago the Federal Reserve validated that our economy was on track by raising interest rates for the first time in years. Also, just this week the private sector ADP payroll estimate of jobs gained in the United States was a robust 257,000. In other words, it seems unlikely that our economy has all of a sudden turned sour and perhaps the more likely explanation is just that investors are simply in a bad mood.

While speaking with a client this morning I asked if they were concerned about the fall in the market this week. Their answer was, “Bob, I don’t step on the scale to weigh myself every day. If I did, it would drive me crazy and I would never get to where I want to be. So no, I haven’t looked at what the market is doing right now and it is of no immediate concern to me.” Good advice.

We understand that even after reading the above, many of you might still be anxious about the market which is completely understandable and normal. For both clients and non-clients alike, if you would like to speak in person about these events please let us know and we will contact you as soon as we can.

Posted by on 01/07/2016

Bob Gillooly, CFA is a portfolio manager and enjoys working directly with clients to help plan and implement investment strategies based on a client’s own needs. To contact Bob directly, please call 510-858-2723 or email bob@elmwoodwealth.com