Market Update - August 18, 2011
Another nasty day on Wall Street - with the Dow down about 470 points (4.4%) with an hour left of trading. You never know, but I'm going to speculate there won't be a late day rally pushing the market positive. This drop pushes the US markets close to their lowest point for the year.
As a recap, the S&P 500 (large cap stocks) is down 9.4%, S&P 400 (mid cap stocks) is down 11.2%, Russell 2000 (small cap stocks) is down 14.9%. Developed international stocks are down 12.3% and emerging market international stocks are down 15.5%. That would put an aggregate, globally diversified stock index down somewhere in the neighborhood of 12.5%.
To say the least - it's been a rough couple of months for stock investors and is shaping up to be a rather unpleasant year.
In the video above I update some of the levels we're watching as to if/when investors should get themselves completely out of harms way. I also touch on Gold and US Treasury Bonds as they both have been performing very, very well - and give my take on if those rallies will continue.
At the end of the day, my thesis hasn't changed. I think investors need to have a balanced, conservative portfolio and be patient just a little while longer. If done correctly investors will still lose some, but not nearly as much as the market averages during the initial stages of a downturn. If this get's prolonged and more severe I'll be sure to sound the warning siren and let all my clients and readers know when our models suggest either majorly or completely avoiding market risks.
As a reminder, we've had our portfolios between 30% to 50% out of the market for a few months. That was our first phase of defensiveness. There's a fairly good chance another round will come, we're just not quite there yet.