G&S PERSPECTIVES

Change, Change, Change !

“He said it’s been a long time comin’
But I know my change is gonna come”- Aretha Franklin

Ah, October. The time of the year when most of us start to notice a change around us – the coolness in the mornings and nights, shorter days, and the trees switching from their lively greens to brilliant yellows and reds. It is a favorite for so many people, and it is easy to see why! And as many of you know we recently had what felt like a major change for us in the markets the last handful of days as well. After weeks of testing new highs the Dow Jones Industrial Average dropped 831 points on Wednesday followed by a loss of 540 points on Thursday. These moves seem especially startling after the calm ride of 2017 and relatively calm ride we have experienced in the second half of this year. However, did you know that moves of this level are actually expected to occur roughly three times per year?! More on this later, but first, let’s look at what many believe to be the reason causing the market to pull back.

Interest Rates!

Since December of 2015 the Federal Reserve has been increasing interest rates. These interest rates affect the cost of mortgages, auto loans and other debt. With this increased expense to consumers, less money is left to spend on products and services, putting pressure on spending. Companies also feel the impact and will now have to pay more to borrow money, which could reduce investment in new projects and reduce profitability. As of late, the market may be interpreting these increases as “too far and too fast”.

Back to the frequency of market declines, you already knew that we expect to see a move of negative 5% up to three times per year, but did you also know that we expect to see a decline of 10% (what it commonly referred to as a correction) ONCE per year! Typically, these movements are healthy and can provide us buying opportunities.

G&S Perspective: While we are not in the business of predicting what is to come, we are watching closely and will respond accordingly. Our team monitors the market and your holdings on a daily basis and we will continue to execute our process.

We are here to answer any questions you may have.

Sources:
1. Capital Group Website; Planning; Market Fluctuations; “What Past Market Declines Can Teach Us”; https://www.americanfunds.com/individual/planning/market-fluctuations/past-market-declines.html

2. Calamos Investments Website; Volatility Opportunity Guide; https://www.calamos.com/~/media/documents/market-insights/2017/04/CalamosVolatilityOpportunityGuide

At G&S Capital, we build dynamic portfolios and risk management strategies for each of our clients. Our client projects are led by knowledgeable, dedicated financial planners and supported by the G&S Capital team of specialists to provide personalized portfolios, unparalleled service, and independent advice