Saturday Morning's Wall Street Journal said it all, "Stock Plunge Picks up Speed". Fear led the market decline as the CBOE volatility index doubled. Our bruising week ended with the Dow Jones Industrial Average dropping a total of 10.1% from a high reached in May, SP500 down 7.5% from May record. We've hit a true correction in the DJIA index which is a decline of 10%. The market declines 10% a year on average, 15% every three years and 20% or more (true Bear) every five years. We have not experienced a correction since 2011 when the market fell due to the Standard and Poor's downgraded it's rating of US Debt. We have been expecting this correction for sometime and are over due for this normal occurrence. Of course, market declines, no matter how "correct" the correction, never feel good. We wonder if the sky is falling and in particular, if the sky over China's economy shows signs of significant slow down. According to the Wall Street Journal, China is a bit of black box because of their government tight controls make it difficult to know exactly what to expect from their economy. China has had a tremendous growth trajectory increasing at a rate of about 10% a year for about thirty years and most recently slowing down to 7% per Brian Wesbury an economist at First Trust. Another big concern is the federal reserve is expected to raise rates in September and how the strong dollar will impact big company earning reports due to a drag on exports. (Our goods are now more expensive with a stronger dollar).
Let's assume the worst with China's growth. What would happen if china's GDP measured in at 0%? Brian Wesbury, an economist at First Trust discussed raised the question in one of his latest video posts. He notes that we currently export .7% of our Gross Domestic Product (GDP) per year. Hence if China stopped growing and buying our imports our GDP would fall by only .7% to about a growth rate of 1.8% per year. He also notes that this would only be a one time hit against our growth number. He admits this is rudimentary economics. But the point still is valid. We do not need China to keep growing.
Our take, is market corrections are very normal and needed to keep a market healthy. When investor sentiment becomes to bullish we become prime candidates for a market bubble. We believe company fundamentals still indicate growth opportunity in US and Internationally. If you have "extra" funds to invest for the long term. This could be opportunity knocking!
I'm excited to be writing to you from the desk of the President of T. Anton Investment House! For many years, I've had the desire to own an investment management company to help people achieve their dreams. What's that you say, it's hard to dream? I agree. Having the freedom to dream can feel like a luxury. Most of us have many demands on us as our life choices dictate, whether that be a mortgage, small children, aging parents and an ever approaching retirement date. But another reason we don't dream is that we feel intimidated by numbers, financial jargon, financial institutions and financial markets. Our head starts swirling when discussions turn to money. I know because I see that same glazed look in myself when I go to the car place and they start talking head gaskets, internal combustion and fuel injector. I start thinking to myself my head feels like it's going to combust and I better eject out of here! But similar to the car place, we can get the knowledge we need to make informed decisions about our money (or car) to get us on the financial "road" of our choice. I noticed that many times in my office once investing was explained in a common sense way and the focus was placed on the person or couple's goals, their progress toward them and a plan to achieve their goals, the most amazing thing happened; the mood in the room changed from despair or confusion to hope, understanding and excitement! I would think to myself, YES!, their dreams are back in clear focus and they are empowered to make them happen! It's as if the room and it's inhabitants let out a sigh of relief displayed by wide smiles and a mutual understanding that today the scales were tipped in favor of them reaching their dreams. Feelings of gratitude would engulf me knowing that I was able to break down the unnecessary and unhelpful walls toward investing and create a sense of freedom, opportunity and understanding that money can give. I believe, money confidence improves not only our lives and the lives of our loved ones, but also our neighborhood, community and the greater world. Once we feel empowered in our financial life we can use our resources to live out our values and truly help one another. I'm excited to have created a company where your dreams are at the focal point of our work and listening to your life story and how you want it played out is essential to how we invest for you. It is a privilege to help you write your life story and a privilege in the opportunity to make a difference.
We are a boutique investment management and financial planning company. Our goal is for you to understand your money, your portfolio and help you realize your dreams. We help take the angst out of managing investments, retirement, estate and tax planning. We create a roadmap to retirement that incorporates your timeline and your lifestyle.