My View of the Last 7 Years
The last few days have demonstrated how fast markets can move when panic is triggered in the stock market. The chart shows the SPY which tracks the S&P500 index (in Green) and the Volatility Index (VIX—x in Red). When volatility increases the market goes down. The chart shows that the current decline in stock values is rapid, but is still within expected ranges to allow this to remain a “Correction in a Bull Market”.
The height of the VIX is approaching the levels seen in 2010 and 2011, but is a long way from the peak in 2008 when there was a worldwide debt crisis. This correction was overdue and as a result it is going to be overdone. The next few weeks will tell us if this is a Correction in a Bull ( up) market, or a change to a longer Bear (down) market.
This is an excellent time to turn off the Business News and let the volatility of the market play out. There will be a rebound, and then we can make a proper assessment of the prospects for the next year. Meanwhile your allocation between Fixed Rate and Equity investments will determine the degree of exposure to the headline losses in the market.
John R. Boyd, CFP®
Boyd Financial Strategies, Inc.