Are you or your family planning a road trip this summer?
When your family takes a long road trip you can likely predict the overall attitude of the clan upon arrival based on two key ingredients: time and distance travelled.
While most families are really close, an extended period of time in close quarters can sometimes drive them apart. Quirky habits become annoyances. Conversations can run in circles. Games can run out of gas.
If the time invested in the car results in great progress toward a much-anticipated destination the family can maintain a positive attitude over time by focusing on that mutual goal.
However, if the distance travelled is limited due to road construction, crashes, or bad weather, the family’s attitude tends to change. These external obstructions hinder progress and tend to bring a negative vibe to the car.
Stock market corrections like the one we are currently riding through are similar to family road trips. An investor’s attitude toward market corrections is a function of both time and distance travelled.
The commonly accepted definition of a correction is a 10% decline from a record high. The S&P 500 Index has now travelled that distance twice thus far in this correction. We believe its destination is to eventually recover and reach another record high, but it may encounter numerous obstacles along the way that increase the distance travelled.
Those obstacles will take time to overcome which can be frustrating. Key strategies for making the time pass faster include focusing on the goal instead of the obstacles, drowning out noise by putting in your ear buds, or letting your eyelids close to dream of bigger things. The less time you spend focusing on noise the happier your trip will be.
After experiencing a smooth obstacle-free ride for a long time, traders are now obsessed with obstacles. Trade wars and inflation and technology missteps are making traders Queasy according to our proprietary Market Mood Meter©.
While we don’t know how many obstacles this correction will need to drive around before reaching its destination nor how much time it will take before we arrive, we do know our disciplined investment process is designed to help our clients navigate through corrections based on their personal financial goals.
Drive safely and keep a positive attitude!
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Past performance is no guarantee of future performance. In fact, the opposite can be true. The information contained in this report does not purport to be a complete description of the securities, markets, or development referred to in this material. The information has been obtained from sources considered to be reliable, but we do not guarantee that the foregoing material is accurate or complete.
Any opinions are those of IAG and not necessarily those of LPL Financial. Expressions of opinion are as of this date and are subject to change without notice. This information is not intended as a solicitation or an offer to buy or sell any security referred to herein.
Market Mood Meter© Trend strength is determined using S&P 500 Index daily moving averages (DMAs) (8-21, 13-34, 21-55, 34-89, 55-144 and 89-233) to determine whether the short-term DMA value is higher than the longer-term DMA value. A daily moving average is the average price of the index over the indicated number of days. Trend is either Positive (8 points) if the short-term DMA is higher, Negative (0 points) if the short-term DMA is lower or Transitioning (4 points). A trend is Transitioning if the difference between the shorter DMA and longer DMA is between -.34% and +.34% of the shorter DMA. Maximum is 48 points when all trends are Positive.
Market Mood Meter© Momentum strength is determined using the same S&P 500 Index DMAs to determine whether trends are getting stronger or weaker calculated by dividing the difference between the shorter DMA and longer DMA by the shorter DMA. Momentum must be directional – rising or falling -- for 5 consecutive trading days to be Gaining (8 points) or Losing (0 points), otherwise momentum is considered Transitioning (4 points). Maximum is 48 points when all momentum is Positive.