Pullbacks, Corrections and the Threat of a Bear Market
By: Kevin Dombrowski
Market Update

Volatility arrived… with a vengeance. As of Wednesday, most US stock indexes were officially in a correction, which is defined as a drop in 10% from a recent high. Much of this correction occurred over the course of the past few weeks. Many of the giants fell the hardest, including the beloved FANG stocks. From September 27 th to October 24 th , Amazon dropped 17.32%, Google dropped 12.44%, Facebook dropped 13.50%, and Netflix dropped 20.71%. 

In other areas, the Financial Sector was hit particularly hard and as of today had lost 9.51% over the last month, as defined by the Morningstar financial sector. Healthcare fared slightly better only losing 6.80% as defined by the Morningstar healthcare sector. 

It’s safe to say that it was a bad month for the US stock markets World stocks fared just as badly .  The million-dollar question is, are we done? Nobody knows. Many experts predict we are half way to a full bear market correction , defined as a drop of 20% from a recent high. Why do they believe this? Many of the same reasons noted in the past year; fear of global trade wars, an over-heated market and economy, inflation, and aggressive Fed policies. Additionally, they are concerned about the nature of these drops which have seen global markets and US markets move in unison. In fact, the 20-day rolling correlation has increased to 95%, which indicates that those mirroring movements are becoming more pronounced. This could be a worrying signal that markets may have more turbulence ahead.
Are things really that dire? Nobody can predict the market perfectly and there are still many bullish investors that consider downturns as a buying opportunity as these declines in price make companies more attractive and appropriate prospects. These investors believe positive earnings and continued powerful economic data will become the focal points of the market, driving prices higher in the coming months. 

At MainLine Private Wealth, we believe that for long-term investors sticking to strategy that meets your goals, objectives, and time horizons is ideal - while doing your best to tune out the noise as market volatility and uncertainty loom. Trying to time the market is a fool’s pursuit, as research shows that often the best course of action is to stay course and ride out short-term turbulence for long term gains.

Still, we will continue to meticulously research the markets, economy, and the concurrent connections between the two to help our clients invest to best meet their long-term goals.
As always, if you are concerned about the markets and would like to speak further, reach out anytime.  
MainLine Private Wealth 308 E Lancaster Avenue Suite 300 Wynnewood PA 19096