n December and January our model valuation approach and 20 years of experience guided us to become more defensive in our portfolios. Thus, before the current downturn and against some clients wishes, we sold stocks and moved a portion of the portfolio into bonds for most clients with larger accounts who are over 50 years of age. This timely action allowed us to achieve a substantially smaller drawdown than the drawdowns of most mutual funds, stock index funds, or ETFs to date. While your neighbors and colleagues portfolios are exhibiting the same downturn as the stock indices or worse, the Quantum Portfolio, while still in correction territory, has held up much better due to our time-tested and proven long-term valuation methodology.
So What is Next
History has shown after episodes of panic selling the markets eventually come back. The timing can vary to within 4 months to as long as 3 years before we make new stock market highs. In our portfolios we would most likely make new highs faster than the stock market given that we have have experienced less of a correction. Furthermore, our quality always rises faster than mediocre stocks, indices full of unprofitable companies, and/or poorly managed mutual funds and ETFs.
In the meantime, we here at Quantum Capital will continue to invest and collect cash dividends and interest income in the portfolio and dollar cost average that income into now cheaper stocks that will also pay even more dividends. Just as we have recommended in the past, we encourage those that have outside accounts to move out of those under-performing mutual funds and stock index ETFs over to our Quantum portfolios as we believe we will outperform on the upside just as we have outperformed on the downside. Please contact John Henek for moving your old 401k, IRA, or brokerage account to Quantum Capital at Charles Schwab.
A current article that recently appeared on CNBC news is duplicated below:
KEY POINTS
- There have been 26 market corrections (not including Thursday) since World War II with an average decline of 13.7%.
- Recoveries have taken four months on average.
- The most recent corrections occurred from September 2018 to December 2018. The S&P 500 bounced into and out of correction territory throughout the autumn of 2018.
- The S&P 500's close below 3,047.53 — its current threshold for a correction — also marked the quickest 10% decline from an all-time high in the index's history.
The U.S. stock market fell into a correction Thursday as investors punished equities in favor of safer assets as anxiety over the spread and potential impact of the virulent coronavirus.
A correction is defined as a 10% decline in one of the major U.S. stock indexes, typically the S&P 500 or Dow Jones Industrial Average, from a recent 52-week high close.
Historical analysis shows these corrections result in a 13% decline and take about four months to recover to prior levels, on average.
But there's one big caveat. This is only if it does not fall into bear market territory, down 20% from a high. If the losses stretch to 20%, then there's more pain ahead and a longer recovery time.
Here are the numbers, according to CNBC and Goldman Sachs analysis:
- There have been 26 market corrections (not including Thursday) since World War II with an average decline of 13.7% over an average of four months.
- Recoveries have taken four months on average.
- The most recent corrections occurred from September 2018 to December 2018. The S&P 500 bounced into and out of correction throughout the autumn of 2018 before plunging into a bear market (a 20% decline from its all-time high) on Christmas Eve.
The Dow and the S&P 500 each fell 4.4% on Thursday — the Dow lost a record 1,190.9 points — and each closed well in correction territory based on their recent record close. The S&P 500 and Dow are each down more than 10% since Monday and more than 12% each since their respective all-time intraday and closing highs hit earlier in February.
The S&P 500's close below 3,047.53 — its current threshold for a correction — also marked the quickest 10% decline from an all-time high in the index's history, according to Bespoke Investment Group.
- There have been 12 bear markets since World War II with an average decline of 32.5% as measured on a close-to-close basis.
- The most recent was October 2007 to March 2009, when the market dropped 57% and then took more than four years to recover. The S&P 500 closed in a bear market in December 2018 using intraday data.
- Bear markets have lasted 14.5 months on average and have taken two years to recover on average.
If you have any questions regarding our newsletter, or would like a comprehensive portfolio review and update of your financial plan please feel free to contact us. John Henek can be reached at 708-267-0627.
Kindest Regards,
Joshua E. Betancourt MSA
Chief Portfolio Strategist/Financial & Tax Planner
Quantum Capital Investment Inc.
Joshua@Quantumcapitalinvestments.com
All written content is for information purposes only. Opinions expressed herein are solely those of “Quantum Capital Investments” and our editorial staff. Material presented is believed to be from reliable sources; however, we make no representations as to its accuracy or completeness. Fee-based financial planning and investment advisory services are offered by “Quantum Capital Investments” a Registered Investment Advisor. Insurance products and services are offered through “HST Insurance brokerage and JDS Life insurance brokerage.” “Quantum Capital Investments” and "HST and JDS insurance brokerage” are affiliated companies. The presence of this web site shall in no way be construed or interpreted as a solicitation to sell or offer to sell investment advisory services.
|
