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A Review of Equity Markets December 2018


Summary: The US Equity markets are down some 10% from their highs. We should all thank our stars for this wonderful Holiday gift where we can add to high quality shares at approximately 10% less than what they were going only a few weeks ago.  We urge our money buddies to add to their holdings to make the best of this situation.

Corrections that are guaranteed: We have often told investors that stock market corrections are guaranteed to happen. As Peter Lynch would put it, 7% to 10% corrections happen with incredible frequency – almost once a year – and provide wonderful opportunities to buy more. Though any correction can become extended into 20% or even more, historically such occasions have been opportunities to enhance one’s wealth. This correction is no different.

Some faith and patience equals millions of dollars: We include our favorite picture – the long term total return from large companies over the last 92 years which encompasses different presidents, economic cycles, wars, depressions, etc. It shows how $1 invested in 1926 is worth $7,351 today. In almost 80% of all 10-year periods, the stock market has provided a return that exceeded returns from other asset classes, and we see no reason why it won’t be the same in the future. All that was needed was a long-term approach, patience, an ethic of saving and investing, and millions could have been made!!!

The stock market is NOT a black box: Though relatively unpredictable in the short and intermediate run, the stock market is NOT a black box. It is comprised of businesses that are often global and benefit from global expansion. These businesses have tangible earnings and their current earnings yield of 6.25% is much greater than in the fixed income market and cash market.

We strongly advise you to take this opportunity to invest in the equity market.

Please let us know if you would like to discuss any of the above.

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