Many investors tend to keep a fairly short term perspective regarding their equity portfolio despite the fact that this asset class is typically held in a portfolio to provide long term growth.
Moreover, it is becoming increasingly easy to track one’s portfolio on a daily basis via a smart phone, tablet, computer, etc. In addition, investors receive monthly statements from their custodian and Sigma sends out quarterly performance reports. Yet, the tendency to micro monitor one’s portfolio is out of sync with the long term nature of this asset class.
With this backdrop, it is understandable why many investors are becoming increasingly unnerved by the market’s recent volatility and poor performance. Yet, these corrections are fairly normal and will occur time and time again.
Viewed from a 10-year time horizon, the recent pullback appears to be fairly mild. However, from a three month perspective, the weakness is more dramatic and worrisome to many.
We do not believe that we are in the early stages of an economic collapse. Yes, growth rates may be slowing, and trade wars and geopolitical risks have increased the volatility of equity prices. Yet, our domestic economy is solid, consumer confidence remains strong, corporate earnings are robust and any movement towards a more even playing field with tariffs should prove beneficial. Over the long term, we believe earnings will trump (pun intended) the current concerns weighing the market down.
All comments are welcome.
Christopher J. Kress, CFA