As evidenced by the 2% decline in stocks today (04/02/18), we are seeing a significant acceleration in overall market volatility. As shown in the chart below, 4 of the top 10 biggest one-day point declines in the history of the Dow Jones Industrial Average, have occurred in the last 60 days. In fact, stocks have now suffered the worst Q2 start since the Great Depression.
Currently, the market is down nearly 12% since the January 26, 2018 peak and technical analysis now suggests that a stock market correction is starting to become the likely scenario. As a result, asset protection and preservation for future growth should be a primary investment objective.
The current market is following a similar pattern as the last major correction in 2007/2008 (see the chart below)...up one day and down the next, but with an overall trend towards the negative. Back in 2007/2008 it took 17 months to reach the market bottom for a total loss of 54%.
Understanding the 2007/2008 chart below:
The LEFT axis (and blue line) represents the daily price movement of the DJIA
The RIGHT axis (and red line) represents the daily price movement on a percentage basis
For example, on October 13, 2008, the market rallied over 11%...then 2 days later, on October 15, the market crashed nearly 8%.
It’s a 17 month period from market peak in Oct 2007 to market bottom in March 2009
During that period, the market rallied several times but always reverted back to the downward trend
Nine months into the decline (July 2008) the market was down nearly 23%
Twelve months into the decline (October 2008) the market was down over 40%
After 17 months the market reached the bottom (March 9, 2009) for a total decline of nearly 55%
It took a total of 6 years for the market to reclaim the peak reached in October 2007.
Moral of the story, we are most likely in a long term market correction. As a result, asset protection and preservation for future growth should be a primary investment objective.
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