Can Anyone Explain the Suspicious Market Sell-Off Since Jan 1?

Like many of you, we’ve been fielding lots of questions lately about stock market turmoil and the global economic slump. While we work with many talented financial advisors and wealth managers, we’re not licensed financial advisors ourselves and don’t pretend to be.

Maybe some of you who are can help explain what’s going on.

From where we sit as individual savers and investors, things shouldn’t be all that bad. To no one’s surprise, The Fed finally raised interest rates a little in early December and it didn’t cause a market meltdown. Throughout 2015, the Middle East remained highly unstable, the Chinese economy slowed dramatically, oil prices plummeted, corporate earnings in the U.S. were mediocre, and the U.S. dollar rose consistently against most other major currencies thus, making our exports more expensive.

OK. We get it.

But what’s really changed since Jan 1?  All these factors were at play long before the calendar flipped over to a new year and most U.S. stock indices ended 2015 flat +/- 1 percent. Why are we down about 10 percent already this year, the worst start to a new year in history?

We’re also confused because the domestic economy—while not great—hasn’t had a single quarter of declining GDP. We believe you need two of those in a row to have a recession, right? Also, the jobless rate fell to an 8-year low of 4.9 percent and the past six months were the best extended period for employee paychecks since the recovery began 6-1/2 years ago. Housing supply reached the lowest level since 2005 and the “quit rate” hit a 9 year high–that’s the percentage of workers who quit their jobs voluntarily to take a new job or who have the confidence to find a new job soon after leaving. Finally, with oil prices at such low levels, shouldn’t U.S. consumers be benefitting from much cheaper prices at the pump and much lower home heating bills?

Conclusion

Again, these are concerns of rational, individual (i.e. non-professional) investors and savers. Please contact us directly if you can share any light from the trenches. We’d love to hear from you.

Have a great Valentine’s Day. Be thankful for the one’s you love.

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TAGS: bear market, recession, volatility, stock market