Presentation on theme: "Strategies For Today’s Market Environment 47223 10/22/08 Rebecca Gaylor, CFP ®, CFS ACTIVE MONEY MANAGEMENT Securities offered through JW Cole Financial,"— Presentation transcript:
Strategies For Today’s Market Environment /22/08 Rebecca Gaylor, CFP ®, CFS ACTIVE MONEY MANAGEMENT Securities offered through JW Cole Financial, Inc. Member FINRA/SIPC. Advisory Services Offered Through Jonathan Roberts Advisory Group J. W. Cole Financial, Inc. is not affiliated with Genworth Financial Wealth Management. This market analysis is provided by Genworth Financial Wealth Management.
2 Overview The challenges in the market today, at times, seem overwhelming and insurmountable. Many of the market events that seem so unique today, however, have happened before in our economy. We can draw many parallels between today’s market environment and historical events. We’ve been through similar scenarios before, and the markets have been resilient.
3 Review of Historical Shocks We reviewed the most impactful market shocks over the last 30 years to draw comparisons. We examined investment bank failures, bank implosions, corporate and municipal bankruptcies, wars, scandals, and much more. Two themes emerged from analyzing these events and subsequent market movements: Nothing is unique – the recent events have parallels to past events Markets have tended to weaken, but in relatively short order have absorbed and moved on Let’s examine these market events in more depth Past performance is not indicative of future results.
4 Major Market Shocks Since 1970 Arab Oil Embargo Chrysler Bailout 1987 Market Crash Asian Crisis Dot Com Bubble The history of the stock market is full of shocks to the system. But as this graph of the Dow Jones Industrial Average shows, the market has survived the changes over the last 30 years and thrived. Source: Google Finance, September Dow Jones Industrial Average returns are shown with reinvestment dividends. You can not invest directly into an index. Past performance does not guarantee future results. The Dow Jones Industrial Average (a registered trademark of Dow Jones & Co., Inc) is an unmanaged index composed of 30 common stocks
How do the Markets React to Financial Shocks Event NameEvent TypeKey Date Months to Market Improvement* Penn Central BankruptcyBankruptcyJun-707 Lockheed near bankruptcyNear BankruptcyFeb-710 Arab Oil EmbargoFinancial CrisisOct-7312 Watergate/Nixon ResignationPolitical CrisisAug-742 Franklin National Bank CollapseBankruptcyOct-742 NYC Near BankruptcyNear BankruptcyOct-751 Chrysler LoanNear BankruptcySep-792 President Reagan ShotPolitical CrisisMar-811 Lombard-Wall Inc. Repo FailureFinancial CrisisAug-821 Latin American Debt CrisisFinancial CrisisAug-821 Continental IllinoisBankruptcyMay-842 Drexel Burnham LambertBankruptcyMay-862 S&L Industry CrisisBankruptcyJan-871 US Stock Market Crash of '87Financial CrisisOct-872 Gulf War IPolitical CrisisAug-904 Kidder PeabodyFinancial CrisisOct-941 Orange County BankruptcyBankruptcyDec-941 Barings Bank CollapseBankruptcyFeb-950 Asian Financial CrisisFinancial CrisisJul-972 Long Term Capital ManagementBankruptcyAug-981 Impeachment of President ClintonPolitical CrisisDec-982 Dot Com Bubble BurstFinancial CrisisJan /11 Terrorist AttacksPolitical Crisis1-Sep12 Enron ScandalBankruptcy1-Oct1 War in IraqPolitical Crisis3-Mar1 Amaranth AdvisorsBankruptcy6-Sep0 As the table indicates, the market generally begins to improve in 1 to 4 months after the event. Median Time to Recover – 1.5 Months Average Time to Recover – 3.3 Months * Months to market improvement indicates the approximate amount of time that elapsed until the S&P 500 Index either recovered to its level prior to the event, or until the S&P 500 Index began a path of sustained improvement following the event. Source: Analysis by Bob Bannon, CFA, Chief Risk Officer, Genworth Financial Wealth Management, September 2008 You can not invest directly into an index. Past performance does not guarantee future results. The S&P 500 (a registered trademark of the McGraw Hill Companies) is an unmanaged basket of 500 stocks that are considered to be widely held and thus believed to be a good indicator of overall market performance. This index of common stocks is weighted by market value.
6 Market Comebacks During the last century, the stock market has generally bounced back after turbulent years. As illustrated below, market returns (as shown by the S&P 500 Index) have been very favorable after consecutive down years. Source: JPMorgan Asset Management. Market returns represented by the S&P 500 Index returns (price only). Returns reflect calendar year returns and not peak to trough. Past performance is not indicative of future results. Data as of 12/31/07.
7 Conclusion The hype that accompanies major market movements can be overwhelming – especially with today’s 24/7 news channel coverage. Markets over time, however, have been incredibly efficient and resilient. We believe the markets will bounce back. While it might be emotionally difficult, we feel cashing out your portfolio now may be an unwise course of action. We still hold the belief - Invest for the long-term and avoid selling in a panic.