Have we been spoiled?
The answer to this question is most definitely, YES! Historically, market corrections happen twice a year on average. We have not had a real market correction since 2009, so we have been due for this correction for some time.
There have been several factors in the most recent weeks and months that created the perfect storm and left investors nervous. The ongoing debt dilemma for Greece, the commodity price meltdown highlighted by the 60% drop in oil, and China’s economic slowdown are all major contributors to this market correction. Taking all of this into consideration and factoring in the Fed’s indecision about whether or not to raise interest rates, it is no wonder investors are taking their losses. This is what many strategists consider “panic selling.”
We’ve spent most of 2015 trading in a very narrow range, so it has been difficult at best to find buying opportunities. Some very strong companies have been irrationally punished by this market sell-off. For example, Apple (AAPL) is one of the most profitable companies in history and has been at the peak of its performance for a long time. When the market makes an adjustment like yesterday, some commentary will treat this company as if it is going out of business. In reality, this could be the opportunity to own a strong company at a discounted price that could result in a high yield going forward. The same could be said for Disney (DIS), AT&T (T) and Verizon (VZ). Easing in as the market fades will give you continually greater margins of safety, greater discounts below fair value, greater and greater yield and income, and increasing potential for much larger capital gains when the market snaps back and returns to normalcy.
Although we will likely see more volatility for the next month or so, I believe there are opportunities to buy good companies and we will see the market rally again by year-end.
Hosler Lee Wall, CPA/PFS, CFP
Wall Titus, LLC
The opinions expressed herein are solely those of Wall Advisors, Inc. as of the date posted and are subject to change without notice based on market conditions and economic changes. This commentary is for educational purposes only and should not serve as financial advice or an offer to sell any product. None of the statements herein constitute a solicitation recommendation or an offer to buy, sell or hold any securities, other investments or to adopt any investment strategy or strategies. Past performance is not indicative of future results. These opinions do not guarantee any specific outcomes or returns and do not supercede personalized recommendations from your financial advisor. This material may not be suitable for your personal financial situation and investment objectives. Consultation with your financial advisor for specific strategies appropriate for your goals is recommended.
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