During any crisis, the question is always: “Is it different this time?” Our former Chief Investment Officer, Rick Kramer, has lived through some of the worst bear markets this country has ever experienced and in this episode he offers his insights on the current market environment as well historical perspective.

When a market reaction is as violent as the current one, it is always due to fear. More specifically, fear of the unknown. Having no idea what will occur tomorrow, much less the next several weeks, months or years in the future, allows human emotions and psyches to run rampant and envision the absolute worst possible situation.

Everything Old is New Again There is always a newer, cooler investment to catch your interest.  The large majority of those may seem to be too good to be true, and usually are.  This phenomenon didn’t just start in the last few months, years, or decades.  See below for charts of a really old one and a fairly recent one.

Current Market Volatility In Perspective After reaching an all-time market high on September 21st, the S&P 500 entered a bear market (20% decline) in late December, falling to levels last reached in early 2017.  Having experienced positive returns through September, the S&P was down just over 4% for the year.  All other domestic and international equity asset classes had greater full year losses.  Declines of this magnitude naturally cause one to wonder what the future holds and if they should make changes to their portfolios. While it may be difficult to remain calm during a substantial market decline, it is important to remember that volatility is a regular part of investing in stocks.  As a client of DHG Wealth Advisors, you’ve likely been invested through one of the five declines over 10% for the S&P 500 that we’ve experienced since 2008. The biggest, which was a 19% drop at the end of 2011, saw a recovery in just 5 months - although many take longer than that to recover.

Happiness is a warm puppy  Many people would agree with the above statement.  A little, fuzzy, snuggly puppy keeping your lap warm would indeed make most people happy.  But what if the warmth was coming from the puppy urinating on you?  Would you feel the same?  Would your feelings about  a “warm puppy” be different in that scenario?  We have purposely used this tasteless example to underline the fact that a person’s expectation has a lot to do with their feelings.  If someone’s expectations are met, or exceeded, then most people are happy about that occurrence.  If something doesn’t meet expectations, then typically there is an unhappy or disappointed result.You may be asking what any of this have to do with your investment portfolio?  Quite a lot. With financial markets, there are known expectations.  Some basic, some more complex.  An example of a basic financial expectation is that stocks...

The Incredible Shrinking Market  Over the last 20 years there has been an interesting phenomenon in the US stock market.   Simply stated, the number of listed stocks on US stock exchanges has decreased dramatically.  See Exhibit 1 below:Source: DFA Inc.Note that the number of listed stocks peaked in 1997 and has continued to decrease almost every year since.  Also notice that the number of foreign listed stocks has increased or remained stable during that time. To view this in another way, see Exhibit 2 below:Each year there are new stock listings and delistings. Note that in most years since 1996, there are a greater number of Delists than New Lists.  This continuing trend is happening for three basic reasons:   Public mergers and acquisitions   Private mergers and acquisitions (private equity)   Many new companies are staying longer in the private sector  Public mergers, such as Amazon buying Whole Foods or AT...

Finally, Finally  After months and months of experiencing an extraordinary period of muted volatility, we finally encountered stock market fluctuations that have grabbed investors’ attention.  Below is a weekly bar chart of the S&P 500 Index:Each bar represents the high and low for one week, starting with the first week of January 2017 and ending with the last week of March 2018.  In case you have been glued to the Winter Olympics and March Madness and have not surfaced long enough to appreciate what has happened, this chart shows the incredible differences between the first 13 and the last 2 months of that period.  Not only was the difference between the weekly highs and lows dramatically tamer during the first 13 months, but the direction of the bars was primarily up or sideways, with no meaningful down periods. During February and March 2018 those trends changed.  There were meaningful differences between the highs and lows, and the direc...

Days of Wine and Roses 2017 was a beautifully sweet, heady year for global stock markets.  Proof of this can be seen in the consistency of the performance of returns.  For the first time in the history of the world (literally), global stocks had 12 straight months of gains (as measured by the MSCI All Country Equity Index).  That means the last day of each month was higher than the first day of that month, for all 12 months -- the first time this has occurred since tracking began.* In addition, the S&P 500 set an all-time record for the number of days the index endured less than a 3% drawdown (over 300 days and counting).**  (*MarketWatch.com 12/27/2017 “Global stocks just made history by rising in every month of 2017”)  (**BusinessInsider.com 10/23/17 “The stock market just made history”)We will discuss the individual asset classes later in the report, but it suffices to say that things couldn’t get much better....

W.O.W.Global stock markets have continued their seemingly indefatigable upward trends during the third quarter, even showing strength during some historically negative US events.  For instance, Hurricane Irma ravaged many portions of Florida over a weekend.  The following Monday, US stock markets made new, all-time highs. Wow.  On Sunday October 1, a lone gunman in Las Vegas committed the largest mass shooting in our country’s history.  The next day, even with this atrocity, US stock markets made another new high.  Wow, again.   But those are not the “wows” we’re talking about in the title.  All great bull markets climb a wall of worry (WOW), or fear.  If there was no fear, all investors would be fully invested and there would be no one left to buy stocks.  The current bull market is no different than past ones, although it appears that the market’s chutzpah, its boldness and temerity, have been at all-time...

Look Out Below!!Did that get your attention?  Sorry, we just couldn’t help ourselves.  The clever title is supposed to scare you into thinking we were talking about the market going down.  If you read or listen to just about any news source, you have undoubtedly heard some expert warn about stocks going down.  They have been doing this for several years.  After all, we are in our ninth year of a bull market.  It makes sense that we should get a meaningful downturn sooner than later.  Doesn’t it? The fact is that we will indeed have a meaningful market correction – sometime.  Whether it is next month, or next quarter, next year or a few from now, we will indeed have a bear market, defined as a correction of at least 20% from a recent high.  And when it comes, it will take many people by surprise.  Most likely it will start innocently, with a pullback much like others we have experienced over the last few years.&nbs...