Thoughts on Recent Volatility
As many of you may have noticed, the S&P 500 dropped 2.96% in the last 2 trading days of last week. (1/22/14 – 1/24/14) This round of market volatility was brought about in large part due to concerns over economic weakness in emerging markets and a poor reading on Chinese manufacturing.
No matter the reason, what we want to communicate with you is that volatility is a natural part of investing and we will be closely watching for any buying opportunities it presents us now or in the future. One note of interest is how volatility has been lacking compared to historical averages recently. According to JP Morgan and FactSet, the average intra-year decline in the S&P 500 since 1980 has been 14.4%. However, we have not experienced a greater than 10% drop in over 2 years.
BOTTOM LINE: Volatility is a normal and needed part of investing. While we do not know what the future holds, we do know that we will experience volatility from time to time and it is needed to buy assets at discounted values. We will be closely watching for those opportunities.
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