Dear Fellow Shareholders,
During periods of heightened market volatility there is a tendency to take money out of the market to safeguard it. However, history shows that staying invested during volatile times can be beneficial in the long run.
Since the S&P 500® record high in September, the equity markets have entered a correction period coupled with excessive market volatility. The market’s movement is primarily due to trade concerns, the possibility of higher interest rates, and fears of an upcoming economic slowdown. We believe the recent market action is driven more by changing headlines rather than fundamentals—and therefore we believe the bull market that started in 2009 remains intact.
In our years of experience we have seen excessive volatility happen time and time again. This type of volatility could lead to investor panic, taking the best companies down with the worst. Generally we find these periods to be attractive buying opportunities to purchase quality growth stocks/funds at a discount. Think of it this way. If you are shopping at your favorite retail store and everything suddenly becomes 20% to 30% cheaper would you panic by running out of the store? Of course not!…you would probably take advantage of the sale and buy more merchandise. We believe the same logic applies during market corrections. To us, buying high-quality investments “on sale” during significant downturns can lead to higher long-term gains as these growth companies are usually the first to snap back as the broad market recovers.
While no one can know what will happen in the coming months, it is important to realize that over decades the stock market has generated annualized returns of 8% on average per year. This includes significant market declines experienced on Black Monday in 1987, the dot-com bust in 2000 and the financial crisis in 2008. Over the long-term, the market has had an upward bias with significant market corrections proven to be exceptional buying opportunities.
We realize it’s easy to say volatility and market dips will work themselves out over time but it still can be incredibly difficult to watch a portfolio’s value decline. However, past performance (no guarantee of future results) reflects that investors who stayed invested during these correction periods have enhanced their long-term portfolio return.
We encourage investors to be patient, avoid market timing and take advantage of market opportunities as they present themselves.
Thank you for the opportunity to manage your assets.
Robert S. Bacarella
Robert S. Bacarella, Founder and President
Monetta Financial Services, Inc.
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