A drop in the market?

31 08 2009

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By Jon Castle, CFP®, ChFC®

Well, it appears that the market euphoria that has driven the major stock indices is about to end for a while.  Not that anyone can foresee the future with any accuracy, but it sort of… feels like the market needs to take a bit of a breather.  After about 15 years or so of managing money and surfing the ebbs and flows of the market, you sort of get a feel for it, I suppose.

Actually, a correction at this point makes sense.  The S&P 500 index had a good run from early July – 167 points from the start of its run at 872 and then finishing up with a high of 1039 last week.  A 19% sprint in only 6 weeks or so makes for a good pausing point here as kids go back to school and Labor Day is just around the corner.

It wouldn’t surprise me a bit if the market didn’t bleed off about 10% or so over the next several weeks… from looking at the charts, it seems like a nice place for it to rest would be about 950 on the S&P – or about 8750 or so on the DOW – by the end of September or early October.  That would put it within a few weeks of being ready for a nice Santa Clause rally into December and maybe even January.

Not that it matters much for sensible investors, though.  Historically, markets trend generally upwards coming out of the latter part of a recession, so the fact that the markets give returns in spurts and lumps is just part of the game.   At this point, we’ve recommended that portfolios be repositioned back to the investor’s natural risk tolerance – a core baseline, if you will.  With a little overweights here and there to take advantage of a cyclical recovery, of course.

Now to control the emotions as the market corrects a bit… that’s always the hard part.  But at least Labor Day means a three-day weekend!

I wonder if we can rename “Labor Day” into “Golf Day?”

 

This blog is for informational purposes only.  This is neither an offer to purchase nor sell any securities.  All investing involves the potential of loss – including invested principal.  Indices quoted are general barometers of security price movement.  You cannot invest directly in an index.  All information is obtained from sources deemed reliable but not guaranteed.  Past performance is not a guarantee of future performance.  No tax or legal advice is given nor intended.

Certified Financial Planner Board of Standards Inc. owns the certification marks CFP(R), CERTIFIED FINANCIAL PLANNER(tm) and federally registered CFP (with flame logo) in the U.S., which it awards to individuals who successfully complete CFP Board’s initial and ongoing certification requirements.

Investment advisory services provided by PARAGON Wealth Strategies, LLC, a registered investment advisor. 

10245 Centurion Pkwy. N. Ste 105, Jacksonville FL 32256   (904) 861-0093

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