Keep Your Arms and Legs in the Car at All Times

Posted In: COVID-19 Market Update

Many of us enjoy thrills: that giant coaster at the amusement park or the latest heart-stopping blockbuster at the box office. However, when it comes to volatility in our portfolios, most of us prefer the carousel or a documentary on the history of deck staining.

 

The past week was not a very tame period. In fact, it was the worst week for the NASDAQ market since March. After hitting all-time highs the previous week, the NASDAQ market has been like a rollercoaster with lots of twists and turns ever since. We saw the markets climb higher and higher in August followed by a steep drop last week. From the market peak, the NASDAQ market had a sharp 11% pullback over a three-day period.  This has left many investors waiting for their stomachs to fall back into place and ready to exit the “ride.”

 

According to history, this may actually be good news. Bespoke Investment research shows that in previous instances when the NASDAQ market dropped 10% or more in a three-day span, the NASDAQ bounced back strongly. There were 38 times where this occurred, and the average gains afterward were as follows:

 

  • One week later: 3.06% average gain
  • One month later: 9% average gain
  • Three months later: 8.75% average gain

 

Our portfolios at Ambassador have not been spared from the selloff. During times like this, many are inclined to get off the ride and send cash to the sidelines. These scary times in the market often cause investors to worry or second guess their financial strategy.

 

We should not fear.  The Apostle Paul provided great wisdom for times like these:

 

Don’t worry about anything; instead, pray about everything. Tell God what you need, and thank him for all he has done. Philippians 4:6

 

What we “want” and what we “need,” of course, are often vastly different.  Our faith drives how we approach these markets. Instead of approaching these downturns with fear of losing what we want, we should view these dips as great buying opportunities. As we get to the second half of September, we should see the markets pick back up in the historically stronger part of the month.

 

Like the warning, “For your safety while on attractions, please keep your hands, arms, and legs inside the ride at all times,” we need to adhere to the adage of “staying invested” for our own financial safety. We are in the middle of a market correction, and this ride should be over soon! If you have any money on the sidelines, now is a great time to take advantage of these dips to get ready for the next climb higher.

 

Sources: Yahoo Finance, Reuters.com, and JP Morgan Market Insights

Any opinions expressed in this forum are not the opinion or view of American Portfolios Financial Services, Inc. (APFS) or American Portfolios Advisors, Inc.(APA) and have not been reviewed by the firm for completeness or accuracy. These opinions are subject to change at any time without notice. Any comments or postings are provided for informational purposes only and do not constitute an offer or a recommendation to buy or sell securities or other financial instruments. Readers should conduct their own review and exercise judgment prior to investing. Investments are not guaranteed, involve risk and may result in a loss of principal. Past performance does not guarantee future results. Investments are not suitable for all types of investors. To the extent that this material concerns tax matters, it is not intended or written to be used, and cannot be used, by a taxpayer for the purposes of avoiding penalties that may be imposed by law. Each tax payer should seek tax, legal or accounting advice from a tax professional based on his/her individual circumstances.
This material is for informational purposes only. Neither APFS nor its Representatives provide tax, legal or accounting advice. Please consult your own tax, legal or accounting professional before making any decisions. Information has been obtained from sources believed to be reliable and are subject to change without notification. The information presented is provided for informational purposes only and not to be construed as a recommendation or solicitation. Investors must make their own determination as to the appropriateness of an investment or strategy based on their specific investment objectives, financial status and risk tolerance. Past performance is not an indication of future results. Investments involve risk and the possible loss of principal.

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