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Dealing With Market Turmoil

Posted on: October 13, 2014 |

“We cannot solve problems by using the same kind of thinking we used when we created them.”
-Albert Einstein

Over the past 30 years I have used, several times, the first lines of the song What a Difference a Day Makes in our quarterly commentary; twenty-four little hours.

The song returns to my thoughts as I witness the occasional wild daily swings of the stock markets of the world. The last few trading days of September and the first six trading days in October saw the market careen in one direction and then another. On October 7th, the Dow fell 273 points on news that “concerns mount that global economic growth and slowing1” The next day, the Dow was up 274 points and the S&P 500 index had the biggest rally of 2014 because “The Federal Reserve’s hint that interest rates will stay near zero2.”

Between Derek, Jon, and myself we have decades in the financial trenches. We think of ourselves as battle hardened, solid footing financial managers. I bring this up because the market gyrations we have witnessed the past couple of weeks are so similar to the dozens we have lived through before. Your financial ship is being guided by sets of hands that have successfully weathered these storms.

We are settling into our new offices.

We are now fully moved in to our downtown Rockville, 51 Monroe Street location. We are just off the Rockville Pike and a short distance from I-270. It took us a little bit to get everything installed and eady to go. Fortunately for Derek, he escaped the bulk of the move while honeymooning in Europe!

Thanks to your referrals, we have grown from one Investment Advisor Representative to three and continue to add support staff. Just this month, we are welcoming our newest member of the team, Angela.

Estate Planning

When was the last time you had you Wills or Trusts reviewed? Changes in the Estate Tax Exemption and the Federal Estate Tax rate along with changes in state laws are reasons to have your Estate Plan reviewed by your attorney. If it has been five years or longer we suggest you put that item on your short-list. This may well save your surviving spouse and/or heirs from significant tax and estate issues.

The Markets

The third quarter was not kind to investors with prudently diversified portfolios. While the Dow rose 1.3% and the S&P 500 gained 0.6%, the benchmark S&P 500 posted 15 new 52-week highs and 18 new lows3.

It was the developed markets and the small cap stocks that took a hit and these contributed to negative quarterly returns for diversified portfolios.

The following are the returns for various MSCI Large and Mid-cap Stock indexes for the quarter:

MSCI INDEX
EAFE
EUROPE
EUROPE & MIDDLE EAST
NORDIC COUNTRIES
NORTH AMERICA
PACIFIC
WORLD .

3MTD
-6.39 %
-7.37 %
-7.32%
-5.24 %
0.05 %
-4.46 %
-2.58 %

The Small Cap indexes also faired poorly.

MSCI INDEX
EAFE + CANADA
EUROPE
FAR EAST SC
NORTH AMERICA
WORLD SC
WORLD ex USA SC .

3MTD
-8.75 %
-10.52 %
-4.26 %
-6.19 %
-6.96 %
-8.75 %4

I’ve included an interesting article that I would like to share with you discussing market timing. We thought you might find it thought-provoking and another reason why we do not try and time the markets. It just hasn’t proven itself to be a viable investment strategy.

Please give us a call if there’s anything you would like to discuss. We would love to hear from you. Best wishes from us to you for a wonderful fall season.

John, Derek, Jon, Christina, & Angela

CAPE Fear Article - PRIMO-page-001 (1)

CAPE Fear Article - PRIMO-page-002

1 Associated Press, “US stocks slide as evidence of a global slowdown mounts; SodaStream plunges,” US News & World Report, October 7th, 2014
2 Oliver Renick, “Stocks rally most in 2014 as Fed bets spur rebound,” MSN Money, October 9th, 2014
3 Caroline Valetkevitch, “Wall St. ends down for day, month; indexes gain in quarter,” Reuters, September 30th, 2014
4 Performance data; Source: MSCI as of 9/30/14.

Investment advisory services offered through Ferguson-Johnson Wealth Management, a registered investment adviser.

This newsletter contains general information that may not be suitable for everyone. The information contained herein should not be construed as personalized investment advice. Past performance is no guarantee of future results. There is no guarantee that the views and opinions expressed in this newsletter will come to pass. Investing in the stock market involves gains and losses and may not be suitable for all investors.
Information presented herein is subject to change without notice and should not be considered as a solicitation to buy or sell any security.

Ferguson-Johnson Wealth Management does not offer legal or tax advice. Please consult the appropriate professional regarding your individual circumstance.

Indices are unmanaged and investors cannot invest directly in an index. Unless otherwise noted, performance of indices do not account for any fees, commissions or other expenses that would be incurred. Returns do not include reinvested dividends.

The Dow Jones Industrial Average (DJIA) is a price-weighted average of 30 actively traded “blue-chip” stocks, primarily industrials, but includes financials and other service-oriented companies. The components, which change from time to time, represent between 15% and 20% of the market value of NYSE stocks.

The Standard & Poor’s 500 (S&P 500) is an unmanaged group of securities considered to be representative of the stock market in general. It is a market value weighted index with each stock’s weight in he index proportionate to its market value.

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