2022 May Stock Market Drop

The S&P500 has not hit the “20%” mark for a market correction but we have hit 14% drop since our last market high for the year. I wanted to provide you some analysis and commentary but ultimately we will want to remain patient and not attempt to time the stock market.

Early in the Year Market Declines “Feel” Worse

As of 5/5/2022, we are down 14% from our market high for 2022 and today (5-9-2022) is starting out rough as well. This decline feels more painful when it occurs at the beginning of the year vs later in the year. For example, 2018 saw a 20% decline most of which occurred in the last few months of the year. The market ended up down 6% in 2018 but most investors did not “feel the pain” as much as we do when the drop occurs early in the year.

Investors often feel that when January 1st hits, the returns earned previously are somehow “banked”, so a drop in the beginning of the year often causes more anxiety than a drop later in the year. When investors see a drop later in the year, they seem to feel some of that drop is “the house’s money”. We realize the fact that a loss is a loss regardless of when it occurs, but it is also important to understand this is human nature. It is perfectly normal for market declines earlier in the year to psychologically impact us more than declines later in the year.

How much does the market drop on average?

According to JP Morgan’s excellent “Guide to the Markets”, the market decline’s 14% on average in the last 42 years. The market still ended the year positive in 32 of 42 years.

Market intra-year drops of 14% on average despite positive returns 32 of 44 years

Perhaps one of the greatest examples is the decline in 2020 where the market dropped 34% in only a couple month when the pandemic hit. The market then proceeded to rebound rapidly to finish the year up 16%. Investors that sold even at half way down at 17%, still lost significant upside trying to time the market.

Is this time different? People around me seem really pessimistic?

Interestingly enough, pessimism tends to be good for stocks. If we look at this chart:

Consumer Confidence low is a good sign for future returns

According to the chart above, below average consumer sentiment is a good indicator for better future returns. The logic playing out here is that markets continue to drop as people/investors feel worse about the future. Once all the negativity and selling pressure has run its course, the market then can then rebound. One interesting thing to note is that sentiment is worse than even April of 2020 when the pandemic hit.

Rates are rising, Does that mean the stock market will tank?

Its possible but one of the interesting data points to look at is the following:

Stocks have generally performed well with rising rates as long as they were lower than 3.6%

A few things jump out at me about this chart. The first is that stocks have done well when rates were rising as long as the total yield was relatively low (3.6% since 2009 and 4.5% from 1965-2009). Currently, we are at around 3% for the 10 year bond. If we think the past 13 years or past 55 years are any indication, the current rising rates on the 10 year bond should not choke off stock market growth.

Further, we can look at past rate hike cycles:

Market has averaged 5.8% in tightening cycles

If we look at the past 7 rate hike cycles, the market on average ended up 5.8% and ended up positive in 4 out of 7 cycles. The moral of the story: there is not a convincing enough argument to try to time the market based on Fed tightening.

What about the “I” word…… Inflation?

Inflation has roared ahead dramatically since mid 2021 with the most recent numbers from March of 2022 being 8.6%.

Inflation on a comeback

While food and core CPI are higher than the 50 year average, energy has been dramatically higher at 32%. Energy is notoriously volatile but current pace is increasing quickly. While energy inflation is a concern. The biggest concern from the Fed when they raise rates are wages.

Unemployment at extreme lows and wages are growing rapidly

Unemployment is the lowest it has ever been. Wonder why McDonald’s is advertising for jobs in the drive thru? They are desperate for help. The lack of labor available has caused a run on wages with wage growth growing very quickly.

The Federal Reserve is the most concerned about historically low unemployment and wage pressures more than other items affecting the inflation.

The Federal Reserve has a dual mandate. The Fed reserve seeks to keep unemployment low and keep prices stable. Currently, we have prices increasing rapidly with ultra low unemployment.

Do not let the short term ruin your long term investing plans

This mantra has been my consistent advise to clients that have worked with me over the years. It is very challenging but we need to make sure we do not let short term movements affect our long term plans. I will leave you with a few charts to explain why we need to stick it out with our long term plans.

The average investor (many of which have investment advisors) have underperformed nearly every asset class. How does that happen? Investors try to time the market and jump in and out of different investments at the wrong time. Had the investor simply picked ANYTHING other than commodities, they would have performed better. Moral of the story, stick with our plan and try not to time the market and jump to the latest fad.

As can see from the above chart, our greatest ally is time. We need to be patient and let the 5 and 10 year returns reward us. Diversified portfolios over 5 and 10 year periods are overwhelming positive. While past returns do not guarantee future results, I do think the wise investor should find comfort in their long term goals matching with the markets long term returns.

Ultimately, we need to stick to our long term plan.  It will be nearly impossible to time the next big drop in the stock market.  Should we try, we are more likely to make the call incorrectly and hurt our long term returns.  Attempting to time the stock market is similar to the old “Siren’s song”  longing boats to veer off course and into trouble.  I remain vigilent and will continue to position our portfolios to withstand market jitters and help us reach our long term goals.  If you have any questions, please do not hesitate asking.

I will leave you with the last few times we had similar articles to reassure you that these drops are common and more times than not, they are not signs of worse things to come.


** The information on this website is intended only for informational purposes. Investors should not act upon any of the information here without performing their own due diligence. Reh Wealth Advisor clients should discuss with their advisor if any action is appropriate.

Alot of the slides were take from


Cares Act

Congress has passed the Cares Act. (link below to full text)


  There are many items that could affect you and I will be crafting a longer analysis of items that may impact you and those you know.  Here are some highlights:

1) Individuals making under $75k AGI in 2019 will received $1,200 payment, married couples under $150k will receive $2,400.  An additional $500 for each qualified child.

2) Elimination of 10% early withdrawal penalty for distributions from retirement accounts related to the Corona Virus.  Can be repaid back into the retirement accounts over 3 years.  Income tax may be spread over 3 years as well.

3) It appears all RMD’s from retirement and beneficiary IRA’s have been suspended.  It also appears you can give back distributions taken already this.  I will be confirming these details.

4) Unemployment increased $600 over normal state unemployment.  Benefits available without waiting the normal 1 week period.

5) Additional benefits for small businesses such as loans at maximum 4% interest, potential tax credit, and potential deferring of payroll taxes.

For those looking for additional reading, the best resource I have found so far is here:


Kitces’s intended target market is investment advisors so his articles tend to be technical in nature.

Please do not hesitate reaching out to me with any questions and please do not act without discussing it with a financial advisor.


Steve Reh

Corona Virus – Market Update

Today saw the largest one day drop since 1987 as fear of the corona virus hit the markets. Most market indexes are now down 20% from their high which is what qualifies as a market correction. In 1987, the market dropped over 22% on what is referred to as “Black Monday”.

When Was the Last Market Correction?

Our last market correction of 20% occurred less than 2 years ago in the second half of 2018. It was not as fast as this most recent drop, but markets recovered very quickly in 2019.

Wait, why are some outlets saying we haven’t had a correction since 2008?

I really do not know. They seem to be ignoring the definition of a market correction which by definition is a drop of 20%

How Quickly did we recover from 2018’s Drop?

By April of 2019, the S&P500 had fully recovered from the 20% drop that occurred from late August through December of 2018.

Source: https://en.wikipedia.org/wiki/Closing_milestones_of_the_S%26P_500

Do you see any other times in history that might be a guide?

I do see some parallels with 9/11 in that the world as we previously knew it seemed to be changing and we faced fears we had not seen before.

Due to fear and concerns over the financial firms inside the World Trade center the stock market stopped trading until 9/17. The NY stock exchange opened on 9/17 with a 7% loss and continued to lose over 14% for the week. It was one of the largest 5 day losses the market had seen.

Less than one month later the stock market had regained its pre 9/11 levels


What if we have another 2008?

What do I mean by 2008? I mean another “worst stock market of our lifetime” period. How long did it take to recover from the 2008 stock market?

The recovery came swift and a return to value

  • 40% stocks/60% bond portfolio recovering by November 2009
  • 60% stocks / 40% bond portfolio recovering fully by October 2010
  • The 100% stock S&P500 recovered full by March 2012

The Takeaway

Time periods like we are experiencing now are very challenging for investors. Time periods such as we are in now are tempting to feel that there is no relief in site. However, looking at history, we can see that the stock market, our economy, and country have recovered from even the worst of time relatively quickly. Its persisting through times such as we are in now that allows up to capture the upside of investing. Market timing is tempting and “feels right” when times are rough, however, research has shown us that market timing is extraordinarily difficult (need to be correct over 70%-80% of the time) and in most cases, trying to time the market has hurt our portfolio returns. We are reminded of the “average investor” returns the past 20 years from this slide:

Had the average investor since 1998 simply picked any other the other asset classes and stuck with it, they would have performed better. Further, they did not even outperform inflation.

I will continue to be vigilant in monitoring your portfolios and to ensure we are acting in prudent matters. Please do not hesitate contacting me if you have any questions.

2020 Corona Virus Market Correction

The corona virus continues to dominate the financial press and has resulted in one of the fastest 10% drops in the stock market that we have seen. While its been fast and furious, I think its important to remember that throughout history the patient investor has been rewarded for taking risk and staying in the market.

The Average Drop in any given year from the market high is 13.8%

As the chart above shows, in any given year we see an average drop of 13.8% from the market high. Even with the recent 10% drop the S&P500 quickly saw. We still have not gone beyond a “normal” stock market pull back. While it can be difficult its important to remember the patient investor is rewarded.

While less common, we can see market corrections of 20% like we saw near the end of 2018. Investors that were patient and stayed invested, enjoyed a great 2019.

It has Always been a bumpy ride even when hindsight feels smooth

The past run since 2008 has survived:

  • Muni Bond “Crisis” – some analysts were calling for massive losses in the municipal bond market and that it would not only hurt the bond market but would hurt equities. Neither the bond market or stock market sufferred and its been a long time since we have heard concerns about massive amounts of muni bond defaults.
  • Greece’s Economic Mess would take down Europe and the US would follow – The market dropped in 2011 but it was short lived and the market continued its climb
  • War on terrorism
  • Previous Epidemic Scares
    • Swine Flu in 2009
    • Cholera in 2010
    • MERS in 2013
    • Ebola in 2014
    • Measles/Rubeola End of 2014 Early 2015
    • Zika Virus at Olympics in 2016
    • Measles/Rebeola 2019

Previous Epidemics have had minimal long term impacts on the Market

You can read the article I wrote a few days ago which discusses the previous impacts of epidemics here:

Doing the “Right” thing feels a little wrong

There is a temptation to “do something” despite research showing us that time and time again, the best advice is to persevere through market pull backs and corrections. Trying to time the market is paved with people that have failed attempting to do so. Here is a quick reminder of the rewards of sticking to our model and long term plan:

This chart from JP Morgan shows us a few things. The Average investor under performs nearly any asset class over the past 20 years. The only way the average investor can under perform nearly every investment is by market timing or by jumping from one fad to the next. Had the investor stuck with a 60/40 portfolio they would have earned over 3% higher returns. Bear in mind the past 20 years from 1998 to 2018 are starting at nearly the peak of the dot com bubble. So the returns are inclusive of both the dot com bubble bursting and the financial crisis.

The next thing to remember is that 2008 was the worst stock market of our lifetimes. However, the recovery came swift and a return to value

  • 40% stocks/60% bond portfolio recovering by November 2009
  • 60% stocks / 40% bond portfolio recovering fully by October 2010
  • The 100% stock S&P500 recovered full by March 2012

A Reminder not to let short term results impact your long term plan

Its often easy to say that we should invest for the long term and stick to our plan. However, once we are in the middle of a market correction, it can be challenging. Here is a reminder of the article I sent the last time the market dropped 20% in 2018 before having a great 2019:

Clients should not hesitate reaching out to me to schedule a meeting or call. I am here and working on helping you reach your financial goals.

** The information on this website is intended only for informational purposes.  Reh Wealth Advisor clients should discuss with their advisor if any action is appropriate.

Corona Virus – History Lesson

Today (2/24/2019) the Corona Virus impacted stock markets driving market indexes down more than 3%. Fears of the impacts of the virus results in a relatively large one day drop for the stock market. I wanted to review past Epidemics to help calm investors and understand the risks to their portfolios and the most prudent action going forward.

Is it Time to Panic?

The simple answer is no. The panicking investor has rarely been rewarded. Right now is the time to look at history and review the results. Market Watch has a great article that shows the past results of similar health scares. https://www.marketwatch.com/story/heres-how-the-stock-market-has-performed-during-past-viral-outbreaks-as-chinas-coronavirus-spreads-2020-01-22

Past History lessons of Health Epidemics with the US Stock Market

EpidemicMonth end6-month % change of S&P12-month % change of S&P
HIV/AIDSJune 1981-0.3-16.5
Pneumonic plagueSeptember 19948.226.3
SARSApril 200314.5920.76
Avian fluJune 200611.6618.36
Dengue FeverSeptember 20066.3614.29
Swine fluApril 200918.7235.96
CholeraNovember 201013.955.63
MERSMay 201310.7417.96
EbolaMarch 20145.3410.44
Measles/RubeolaDecember 20140.20-0.73
ZikaJanuary 201612.0317.45
Measles/RubeolaJune 20199.82%N/A
SourceDow Jones Market Data

Note: I borrowed that table and information from the marketwatch article.

As we can see of the 12 previous epidemics, only one had a 6 month negative return for the S&P500 (HIV/AIDS 1981 0.3% Loss). Only two epidemics had negative returns over the next 12 months (HIVE/AID 1981 16.5% loss, and Measles/Rubeola 2014 with a nearly flat 0.73% return).

World Stock Market Impacts

Great Chart from the Market Watch Article

The above chart I also took from the market watch article. This chart shows the world market return as many of these epidemics started outside the US. As expected, the performance was worse than the US market, however some interesting findings are there.

  • Average returns are not just positive over the 1 , 3, and 6 month periods, the 6 month average return is an impressive 8.50%
  • 9 of 13 periods showed a loss over a 1 month period
  • 4 of 13 showed a loss over a 3 month period
  • The same 4 epidemics showed losses over the 6 months period, with losses of 3.25%, 4.30%, 0.57%, and 3.49%. In all cases, these 6 month losses are fairly tame.

Conclusion – Epidemics historically have had minimal risk to portfolios

While its always possible “this time is different”, history has show us that epidemics are likely the least cause for worry for our portfolios. The fear is that we could have another black plague that devastated Europe and Asia in the 1300s that killed 20 million people in Europe (1/3 of the population). However, modern sanitation and public health practices has mitigated the black plague. The combination of modern medicine, health practices, and modern sanitation greatly reduce the odds of another mass plague.

So while the Corona Virus is scary, the odds are your portfolio should weather this threat well. While we cannot predict the future and the risk that “this time is different”, the past epidemics in modern times have had minimal impact on portfolios. As is usually the case, maintaining market risk/exposure is the prudent course of action and the calm/patient investor will most often be rewarded.

** The information on this website is intended only for informational purposes.  Reh Wealth Advisor clients should discuss with their advisor if any action is appropriate.

Market Correction – Do Not Let a Market Drop Ruin Your Long Term Investment Plan

The S&P500 has now officially dropped 20% from its market high. It has exceeded the 14% on average drop. Its now officially a correction. I have said multiples times over the past 10 years that most pullbacks are temporary and we should not try to time the stock market. That has proved wise as we experienced a 16% drop in 2010, a 19% drop in 2011, a 10% drop in 2012, 12% drop in 2015, 11% drop in 2016. Each of those times, we were better off assuming things would not get worse.

Last September/October when I wrote that we need to be patient as the drop in the market could be a false alarm as it was the previous times. This time was indeed different and the market dropped quickly in December of 2018. So now, what do we do?

Market Drops from 1980 Through 2018
Market Drops 1980 to 2018

Source: https://am.jpmorgan.com/us/en/asset-management/gim/adv/insights/guide-to-the-markets

Too Late Market is ALREADY predicting a minor recession

The stock market is a LEADING indicator for the economy. The economy currently as of today, is still showing strength. Unemployment is low and earnings are up. Why is the market dropping then? Future expectations is the answer. With rising interest rates from an aggressive Fed, “the market” is predicting that the economy will worsen and earnings will drop and unemployment will get worse.

Previous Recessions / Bear Markets

Previous Bear Markets and Recessions
Previous Bear Markets and Recessions

Source: https://am.jpmorgan.com/us/en/asset-management/gim/adv/insights/guide-to-the-markets

As you can see from the chart above, there are some examples where the markets sold off even more than what we have seen.

Great Recession of 2008- a 57% drop
Early 2000s (dot com bubble bursting) – 49% drop
Recession of 1973 – 48% drop
Recession of 1969 – 36% drop

We also had a couple of non-recession bear market drops of 28% and 34%.

Realistically, I think the Great Recession and the Dot Com bubble bursting were two historic events that are likely outliers. Which means if we use history as our guide, we are at a 20% drop and may have some room to drop further but we have likely already seen the worst of it. Is it possible it drops another 30%? Yes but I feel its less likely that being less than 10%.

Market Could Recover at any moment but the longest it should take until the drop stops within 1-2 years of starting

The market hit its most recent high as of August 29th 2018. If we look at the previous chart, most drops end within a year and nearly all within 2 years (dot com bubble lasted a little longer). We are already 3-4 months into this drop. The market could recovery at any moment and return to positive returns. The valuations currently look better than they have for years.

For those arguing that “I don’t have time to make up if it drops more”, even if it lasts on the long side at 2 years, you still are not drawing the majority of your portfolio within the next 2 years. You can wait this out and you will likely be better off for it as when you exit the market, then you will be faced with a tough decision of when do you re-enter. Its important to understand the reversal can come at ANYTIME within 2 years. It could have already started the recovery and we don’t know it yet. When markets reverse from a downturn, they often reverse VERY quickly and experience the largest gains in the beginning when many doubt whether the recovery is real.

Where are Valuations Now?

Most metrics show valuation are undervalued

Looking at the above chart from JP Morgan we can see the past 25 years this market drop has made several measures report that the market is now undervalued. Foreward P/E, Dividend Yield, Price to Book, and earnings yield less Baa bond yield all show a market that is undervalued relative to the 25 year average. The only metric showing the market might be slightly overvalued is the Shiller P/E ratio which uses 10 years of earnings data so its tells us less about where we are now and more about how the past decade compares.

On the whole, I feel better about the valuations of the market than I have in a long time. Bear in mind, these numbers indicate that either 1) market will go up or 2) that a recession is coming and fundamentals will deteriorate relative to prices.

What do we do?

I hate to say nothing but the most prudent action is to review our risk allocations and make sure our portfolios still meets our investment objectives. Valuations look very attractive currently and I do think the outlook for the market is better than it was 1 year ago. It may sound odd but the 20% drop is HEALTHY for the stock market. It reminds investors there is risk that goes with reward.

The market has survived much worse times than the ones we are facing now and it will survive this one as well. The most difficult and critical component to success will be sticking with a long term investment plan and not letting market corrections derail the success of your plan.

I will continue to work hard for you to help you reach your goals and perform actions that are supported by research to help you continue to make good decisions with your finances.

2018 Stock Market Jitters Part Two

2018 Market Jitters Strikes Again


Market Jitters are back.  The stock market pulled back strongly the past few days as shown in the following chart.

SP500 Chart October 2018 ytd
SP500 Chart October 2018 ytd



What is happening and should we be concerned?


Corporate Earnings Growth Has Increase Dramatically

Earnings per share (EPS) has averaged 6.9% from 2001 through 2017.  In the first and second quarter of 2018, EPS grew dramatically at 27%.  The growth was a combination of both better margins and higher revenues.



Wait, Is Earnings Growth Bad?

No growth is not bad.  However, when earnings grow quickly it raises concerns about inflation.  Bond investors seeing that growth became fearful of inflation started selling off bonds.   The 10 year treasury bond increased very rapidly. (Chart below shows yield increase on 10 year bond from 3.05 uo to nearly 3.250 before decreasing as stocks sold off).


Higher Bond Yields Bad for stocks

Stock investors seeing yields increase rapidly became fearful that the higher yields would cots businesses more money and hurt earnings.   The argument goes that higher yields increase business’s borrowing costs which in turn hurt earnings as expenses are higher than previously due to the debt.

This increase in yield drove the stock market lower as investors felt higher yields would be bad for future returns of stocks.


Is this a small bump or a sign of things to come.

For those that have read my analysis for years, probably already know my answer.  It is VERY difficult to predict if there will be a bigger drop.  If you just bet “no” and that it was a bump is the road, you would be correct the majority of the time.  Every year, the market drops on average almost 14% from the market high and every drop feels like we will go further into recession.  At some point, it will not be a false alarm and will be a real drop.  However, we will likely not know it until it is over.  Trying to predict the next prolonged drop would have cost us dearly the past 10 years as the market quickly recovered several times.




Intra Year Stock Market Declines
Intra Year Stock Market Declines


Ok, Steve, We will not panic and we will not be tempted to try to time the stock market.  What else can you tell me right now?


One interesting thing is that history tells us that when yields have been below 5%, an increase in yields has generally been correlated with positive stock market returns as shown by this chart:

Rates and Market Return Correlations
Rates and Market Return Correlations


Does this make sense?  It does  when rates have been below 5%, we typically have been coming out of a period of low rates.  Rates would be increases as a response to growth and in general, growth is good for the stock market.    When rates are above 5%, that has historically been during times where growth was too hot and inflation was a problem.  So rates were raising indicating an overheating  economy with runaway inflation or as was the case in the 1970s, runaway inflation with stagnant growth (stagflation).

What if it does get Worse!  How bad is it going to be!

First, I really don’t know.  However, let’s get some context and see what previous recessions have looked like.



Many are quick to assume we will see a 50%-60% drop in the stock market similar to the Great Recession (Financial Crisis of 2008) or the dot com bubble bursting of the early 2000s.  However, those two recessions we more anomalies than the norm.  The dot com bubble was the recent of irrational exuberance and extreme valuations for stocks and the financial crisis was driven by the fear of our financial system collapsing due to banking risk in mortgages and derivatives based on mortgages.    Both events tended to be anomalies in market history.  Therefore, I feel we are much more likely to see a 15-30% drop than a 50-60% drop.  I would also expect diversified portfolios similar to what I use to go do much less that the 100% stocks, S&P500.  So a diversified portfolio dropping in the 8% – 20% range is more likely in my opinion that the large drop we saw in the financial crisis of 2008.  So while I can’t guarntee we will not have another 2008, I do think its more likely if we have a further drop, it will more likely be similar to our more tame recessions.


What Should We Do?

Ultimately, we need to stick to our long term plan.  It will be nearly impossible to time the next big drop in the stock market.  Should we try, we are more likely to make the call incorrectly and hurt our long term returns.  Attempting to time the stock market is similar to the old “Siren’s song”  longing boats to veer off course and into trouble.  I remain vigilent and will continue to position our portfolios to withstand market jitters and help us reach our long term goals.  If you have any questions, please do not hesitate asking.


I will leave you with the last few times we had similar articles to reassure you that these drops are common and more times than not, they are not signs of worse things to come.



** The information on this website is intended only for informational purposes. Investors should not act upon any of the information here without performing their own due diligence. Reh Wealth Advisor clients should discuss with their advisor if any action is appropriate.

Alot of the slides were take from








2018 Stock Market Jitters – Time to Panic or Relax?

2018 Stock Market Jitters


Market Jitters have returned.  It has been a long time since we have had a measurable pull back in the markets.  This past week we have seen the market quickly pull back.  This time is feeling a lot like 2015.  For my clients that were with me then, this market pull back will likely feel familiar.


This post is going to be a review of the last pull back and what we wrote in 2015.  I will be updating data and writing a similar article this time.  The cliff notes version is that this pull back is most likely a pull back and not a recession.  It is possible this time will lease to a recession, however,  the “odds” are in the favor that it’s simply a pull back.  At some point, we will have a pull back that turns into a recession but we are unlikely to know until after the fact.


Stock Market Pullback a Time to Reflect (Article from August 24, 2015)

This article had some key points.

  • The market pulls back on average 14% from the market high every year giving an investor a moment to panic or simply be reminded of the risk with investing. So a double digit pull back is not only normal but common.
  • Pull backs can happen even when markets appear fairly valued
  • P/E Ratio is a poor predictor of short term performance (1 years) and only “ok” at longer periods.
  • Market Timing is difficult and rarely works

A quote from the article

And the Final Reminder – While we try to look at markets rationally, they simply are not rationale in the short term.  If investors start to panic and start selling equities and they witness this downturn, we certainly can see a much bigger drop.  However, if the fundamentals stay strong, it should prove to be another bump in the road.  Pullbacks similar to this are healthy for the market to remind investors that the stock market is risky.” August 24, 2015 blog entry


Mythical Bears and More Stock Market Reflections (Article from August 24, 2015)

This article was conceived because there are always good reasons to think bad things can happen.  Sometimes, its driven by things that make sense other times, myths.

  • Myth 1 – Market is going to drop because rates are going up
    1. Despite the logical myth, when the 10 year treasury bond is less than 5%, rate hikes are associated with a higher stock market (not a drop).
    2. This makes sense in that the Fed is shifting from an accommodating policy to a restrictive policy, they are unable to do so unless the economy is on firm footing which usually means a higher 10 year bond yield.
  • Myth 2 – Companies are Fragile and poised to drop in value
    1. At this time, cash was at an all-time high and dividend payouts were increasing.
    2. Despite share buy backs and dividends increasing, cash was increasing on corporate balance sheets
  • Myth 3 – Bull Market has run for 7 years and we are due for a major correction.
    1. Fact- 1946 to 1961 had 15 years between bear markets
    2. Fact – 1987 until the Tech bubble we had 13 years.
  • Myth 4 – Markets Trend Up and Trend Down over intermediate and long time periods
    1. Over intermediate period (5-10 years) markets have generally trended up or flat vs downward trending.
    2. Marketing timing out of the market during a flat period offers minimal advantage vs staying in the market.


2015 Q3 Stock Market is it 2011 Q3 Again or 2008 Q3?



These articles compare similarities in 2011 and 2008’s Q3 at that point in time.    This article’s point was to argue that 2011’s Q3 , looked as bad or even worth than 2008’s and yet had a favorable outcome. So while we can draw parallel’s to 2008 we also could look at 2011.


The Take Away

We will have stock market pull backs and we will have bear markets.  It will be VERY difficult to tell the difference between the two and most times it will feel like a significant bear market is coming.   At moments like these, it is important to understand that markets have risk and the risk of a pull back is real but we will have several false alarms before the real bear shows up.  Unfortunately in most cases, we will need to participate in the bear market in order to not miss out on the long-term returns of the market.

Do I think we could have a pull back in the 10-15% range?  Yes, I think its possible.   Do I think we can see a bear market drop of greater than 20%?  It is possible but less likely than a smaller drop.   I do not see a drop like 2008 as that was a “once in a lifetime” drop, meaning it is the worst we have seen in our lifetime which means its unlikely to be that bad again (of course the possibility will always exist that we could see a worse drop).


** The information on this website is intended only for informational purposes.  Reh Wealth Advisor clients should discuss with their advisor if any action is appropriate.

Guest Blog Article – Threats of Market Fluctations by Michael J. Garry, CFP(R), JD/MBA

Threats of Market Fluctuations?

I would like to thank Michael J Garry CFP®, JD/MBA from Yardley Wealth Management for contributing to this month’s guest blog article.


Michael J. Garry, CFP®, JD/MBA - Guest Blog Article Threats of Market Fluctuations
Michael J. Garry, CFP®, JD/MBA – Guest Blog Article Threats of Market Fluctuations

One of our responsibilities as an investment advisor is to understand the volatility of the markets and enable you, as the client, to understand various events as each floods the media and grabs the attention of investors.


A large portion of the popular press is dedicated to the effects that the election could potentially have, post-Brexit conditions, and the inevitable possibility of the Fed hiking interest rates. While digesting these reports it is necessary to keep in mind the words of John Bogle, Vanguard founder, “The stock market is a giant distraction to the business of investing.” investors must remember that while various events around the world might be extremely important, they must not serve as a distraction to the long-term goals of investing.


These are timeless words to invest by, as is Bogle’s deeper explanation of them:

“The expectations market is about speculation. The real market is about investing. The only logical conclusion: the stock market is a giant distraction that causes investors to focus on transitory and volatile investment expectations rather than on what is really important – the gradual accumulation of the returns earned by corporate business.”

It is extremely easy to indulge in detailed analysis of economic news and thus, draw conclusions in terms of a portfolio but it is vital to not lose track of the real task at hand.


When this evidence-based investing strategy is realized and incorporated into the minds of each investor it will become a fairly simple task to acknowledge that these intrinsic events exist but will not hinder your ability to achieve the kind of investment success that John Bogle describes.


“In addition to providing you with these types of evidence-based investing strategies, our responsibility as fiduciaries is to discuss what actions – or inactions – are in your best interest when you decide that an economic event is of urgent matter. Essentially, it is both our desire and legal obligation to advise you when you are indecisive in terms of your investment decisions. Ultimately, it is necessary to keep in mind a few key points:

  • Market drops are an expected, unavoidable part of investing.
  • Our advice is simple and straightforward: Stay calm and stay the course.
  • Remember why you’re investing. If you’re saving for a long-term goal, such as a retirement, your allocation already factors in a short-term market drop.

We are aware that the media often presents events in ways that makes it difficult to digest as investors and therefore, so we are always happy to talk about the economic climate and to ensure that your strategy is aligned with your goals.


We believe that market conditions are always arbitrary in the near term. We take the long-term, evidence-based view that you benefit by focusing on long-term investing goals. Academic studies have found that market timing can cost about a percent and a half in foregone returns per year.

Our job is to remind our clients to remember we have prepared for market fluctuations and we don’t respond irrationally to them.

Michael J. Garry, CFP(R), JD/MBA, is the owner of Yardley Wealth Management, LLC, is an independent Financial Advisor who provides Fee-Only financial planning services and investment management in Newtown, PA, and the author of Independent Financial Planning: Your Ultimate Guide to Finding and Choosing the Right Financial Planner

2015 Q4 Update – 2015 Q3 Stock Market is it 2011 Again or 2008 — Spoiler it was 2011

2015 Q4 Update Stock Market Rebounds

Update to the Article: 2015 Q3 Stock Market, Is it 2011 Q3 Again or 2008 Q3?

I realize that people are likely more interested in my opinion on the current market drop but I first want to revist our last market drop.  I will have another article about our current market conditions soon.

Here is a link to our previous article below:

2015 Q3 Stock Market is it 2011 Again or 2008

What Happened in Previous Market drops of Q3 2011 and Q3 2008?

As a reminder here is the performance for the S&p500 in Q2 2008 and Q3 2011.  An ugly 8.87% and an uglier 14.92% loss in 2011.

Q3 Comparison




What Happened in Q4 2011 and Q4 2008?

And here is a reminder how Q4 went in both time periods.

Q4 Comparison


Update – Let’s Look at 2015 Q4

2015 Q4 Update Stock Market Rebounds




Thankfully, the 4th quarter of 2015 looked a lot more like the 4th quarter of 2011.


As mentioned previously,  2008 tended to be an anomaly in that it was one of the worst years we have experienced in the stock market; certainly it was the worst of my lifetime.  Our bias is to remember things we experience and give a greater likelihood of thinking it will occur again (the phenomena is called the “Availability Bias”).  The Availability Bias is the bias that is how we estimate future probabilities based on how easy it is to remember.  A good example would be our current drought in Southern California.  Most Southern Californians would likely overestimate the probability of future droughts based on the ease they can remember our current drought.

Where are we at a valuation Standpoint as of 12/31/2015?

The equity market does not appear to be valued too high or too low.  According to the most recent data as of 12/31/2015 in the JP Morgan “Guide to the Markets”, most measure show that the market is fairly valued.




(Source: JP Morgan)

The P/E (Price to earning measure), CAPE (cyclically adjusted Price to earnings), and P/CF (Price to Cash Flow) all show a market that is fairly valued.

Dividend yield, Price to Book value, and Earning Yield less Baa Bond yield all show that the market is slightly undervalued currently.

So how do I feel about it currently?  As I stated last quarter, I actually think the market is fairly valued and there is both upside and downside and I feel that our best course of action is a diversified portfolio.  If valuation measure were dramatically different, I might feel otherwise.

What about the Bond market with the recent Fed Rate Increase?  I am worried about the bond market but I think for investors in diversified portfolios, the fear is over blown.  The Fed raised rates slightly but it the impact on bond prices was relatively tame.  I think the Fed will be cautious about raising rates unless inflation kicks up.

What is our takeaway?

When markets misbehave (go down), we should look at times in history to see what happened.  We should look at valuation ratios to see if the market is reasonably valued.  In many cases, the best course of action is to 1) take tax losses if you can 2) rebalance if you are too far from your model 3) Trust your asset allocation and risk to prevent you from performance chasing.

** The information on this website is intended only for informational purposes. Investors should not act upon any of the information here without performing their own due diligence. Reh Wealth Advisor clients should discuss with their advisor if any action is appropriate.