Stock prices dropped sharply today. Market moves like today’s cause me to want to relay my thoughts and observations to you and hopefully provide perspective on the move. Thankfully it has been a while since I have done this. Today’s market decline was the worst since the June 24 “Br-exit” news. The major US stock market indexes’ sell-off today was triggered by two concerns: North Korea’s nuclear test and increased odds for an interest rate hike following comments from Boston Fed President Eric Rosengren. The wide-spread stock drop ended a period of low volatility, with the first move of more than 1% in the S&P 500 since July. That lull in price movement for the major market index is better known as the “summer doldrums.” That period usually ends after Labor Day, and certainly did this year. Today all the major indexes fell nearly 2.5%, with the Dow Jones Industrial average down almost 400 points.
Typical of broad market declines like today, selling appeared to be indiscriminate as seemingly all stocks in all sectors were down. The market showed how strong interest rate hike fears are with “interest sensitive” stocks falling the most. The unexpected comments from Rosengren sent shock-waves through those issues. While not anticipating the Boston Fed President’s “hawkish” interest rate statements, I have expected a rotation away from companies that would fall when rates rise and been reducing exposure to those. More of that action was taken today.
The plan for this market continues to emphasize those companies expected to benefit most from higher interest rates and a steady, moderate growth economy. With a defensive bias, sector rotation is underway. This is a risk management approach. The market will reward our portfolios as we anticipate industry group leadership.
As your advisors and stewards of your accounts, we remain confident that our approach will achieve positive results.
Thanks again for your continued trust and confidence.
John Gardner, CFP
