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Gulp! The S&P 500 Index posted over a -12% decline for the week as of this writing. The six-day drop since its record close on February 19 was the fastest drop into a correction since 2008[i]. We have two important things to highlight:

  1. Our read is that this is a volatility pocket inside the economic expansion and does not mean that this is the time for a shift in strategy. Despite supply chain disruptions and the likelihood of a slower rate of growth, we believe the expansion has not suddenly shifted from forward to reverse.

If you think back on the S&P 500 Index returns in the two most recent volatility pockets, the first quarter of 2016 (-9.1% in the first six weeks, during a quarter that eventually posted a 2.3% increase), and the fourth quarter of 2018 (an intra-quarter decline of just over 19%, that culminated in a quarterly decline of just over -14%), short-term market dislocations over concerns about the threat of declining global growth were overcome when economic data later confirmed ongoing expansion. We anticipate something akin to that.  We do not want tactical interruption to overtake strategic perspective.

  1. On Wednesday, we will release a webinar with an in-depth update on our strategy. We see a valuation correction in a projected pandemic’s clothing. Please look for it on our website and expect 30 minutes of detailed information.

 

In addition to the webinar, we look forward to talking with you to make sure that your individual asset allocation plan and your strategy are appropriately aligned for you in this late cycle environment.

[i] Source: Bloomberg Finance LP, DB Global Research