Scary October – Monday Morning Market Memo – October 29, 2018

Good morning,

The stock market posted a sharp decline last week. The Dow Jones Industrial Average fell 3%, the Standard & Poor’s 500 Index tumbled 3.9%, and the NASDAQ Composite shed 3.8%. For the month of October it is even worse, as the Dow and S&P 500 are down 6.7% and 8.8% respectively, while the NASDAQ is down 10.9%. The Dow is on pace for its worst monthly performance since 2010, the S&P 500 is lined up for its worst month since 2009, while the NASDAQ is looking at its worst monthly drop since 2008. As to reasons for the bad month, there is plenty of blame to go around.

Pressuring stock prices are fears of rising interest rates, tariffs, trade relations with China, the upcoming midterm elections, budget problems in Italy, a not so mysterious murder involving Saudi Arabia, disappointing revenue numbers by a couple big technology companies (Amazon & Alphabet), worries we are at peak earnings, and thoughts global growth may be cooling (not to mention October is historically a weak month to begin with). This litany of negatives could not be overcome by positives including economic data showing the U.S. economy grew by a strong 3.5% rate in the third quarter and the fact that earnings are strong overall. So, what to do about all of this?

Keep in mind that investing is a marathon, not a sprint! Invest for the long term and do not let short term market fluctuations interfere with your long term plans. Market volatility is normal and is inherent in the stock market. On average, stocks experience a 5% pullback about 3 times a year, and a correction (a drop of at least 10%) about once a year. While past performance is no guarantee of future results, it is important to note that history shows the stock market does recover from corrections. Remember, time in the market is more important than timing the market!

All the best,
Southport Station Financial Management, LLC