Let’s take a little time here to recap the first quarter of the year. We will use the Dow Jones Industrial Average because that’s what we all look at on the nightly news. The Dow closed at 24,719 at the end of 2017. It then closed above 25,000 for the first time ever on January 4th. Continuing on that hot streak, it broke above 26,000 on January 17th, hitting its all-time high on January 26th, at 26,617. It stayed above 26,000 until February 2nd, when it lost 666 points to end that day at 25,521. On February 8th the Dow finished at 23,860, losing 10.36% over the nine trading days from January 26th. Over the next 11 trading days the Dow made it back up to 25,709 on February 26th. Since then it has been bouncing around somewhere between those two figures. On March 22nd the Dow was down over 700 points and on March 26th it was up over 600 points, so volatility has returned to the stock market. Has the market finally reached a level of resistance? Will it be able to break free of the range it seems to be stuck in now?
The year was 1986. I had been a licensed securities representative for about a year and a half. I was in a meeting with a client who had been with me for about a year. He told me he wanted to sell all the mutual funds he had with me because he “just didn’t believe the market could get any higher.” He was frightened that he would lose his money. The Dow had climbed all the way to 1300, surpassing the point total it had ever reached. Before it had started gaining ground in 1985, the highest it had ever been was at 1052 on January 11th, 1973. On January 3rd 1983 the Dow finished at 777. So in that 10 year period the Dow had lost 26%, not counting dividends. And here we were, just three years from the Dow being in the seven hundreds and now it had grown far beyond anything it had done before? No wonder my client was scared. All he was doing was looking at the past and figuring the future would probably look something like it. But nope, it didn’t. Despite the crash of 1987, the Dow still finished the decade above 2700. But that client never got the growth. His account stopped at 1300 because that’s where he took it all out.
So, will the market ever be able to break free of the range it is stuck in today? Of course it will. It could take off from here and reach 30,000, or 40,000 this year. Or it could hit a rough patch like it did in 2008 an sink to 15,000 or below. The idea is to be prepared for whatever happens. If it goes up, if it goes down, or if it stays the same, be prepared. If all you’re prepared for is an increase, a stock market crash could wipe you out. But if you only prepare for an endlessly falling market you may miss out on some wonderful returns. That’s why we use tactical management. Whether the market goes up, goes down or stays the same, we will try to take advantage of it. That’s how we manage. Lord knows we’re not always right, but we are always trying to get it right. Our goal has always been the prosperity of our clients. And that’s what our goal will continue to be.