Download Dear «firstname - HD Vest Financial Services

«TodaysDate»
«name»
«address1»
«address2»
«address3»
Dear «firstname»,
As you read this letter, we’ve been experiencing something that hasn’t occurred on
Wall Street since 2011 – a stock market correction.
Corrections are unsettling, yes – and they are also part of any ordinary bull market.
Historically, they have occurred about every 18 months. This current bull is
extraordinary – the S&P 500 has sailed along without a correction since October 2011 –
the third longest interval without a correction in the past 50 years. That 2011 correction
took three months to occur, so it was not nearly as dramatic as what we seem to be
witnessing now.1
Thinking in the long-term.
A correction is short-term, and your investing is long-term. The same goes for a bear
market. Patience is part of investing, and when you have the patience to ride out
turbulence and market shocks and stay invested, you position yourself to deal with any
development.
What is driving stocks downward so violently? You can cite three things.
Global investors are starting to believe China isn’t fully admitting the trouble within its
economy. Officially, China has maintained that its economy is growing about 7%. That is
slow growth for China, but still the kind of economic expansion that its business sector
and global investors have relied on for years. A key flash factory PMI for China came in
at 47.1 for August – a reading deep into contraction territory, down from 47.8 for July.
China’s economy relies heavily on its manufacturing engine, and this signal hinted to
many investors that the Chinese economy is currently growing far less than the official
forecasts project.2,3
Oil prices are still descending, partly on the assumption that China will demand less of
the commodity. Light sweet crude even went under the $40 mark Friday for a moment;
it may close under $40 this week for all investors know.3
Wall Street still assumes that the Federal Reserve could raise interest rates next
month. The latest Fed policy meeting minutes did note some conflicting views, but even
the latest (tame) consumer price index and factory output readings may not dissuade
the Fed from its intent to start tightening.
The point is that these are short-term issues. They may not preoccupy investors next
quarter, next month, or even next week for all we know. (Remember the Greek debt
crisis?) “This volatility is likely to remain with us, at least until the end of the year,”
deVere Group CEO Nigel Green told TheStreet, noting that “for most long-term
investors, fears of a near-term financial apocalypse are overdone.”3
Headlines come and headlines go; the market has amazing rallies and harsh selloffs.
Think of them as the “weather” of Wall Street. Stay patient through these headwinds,
and remember that when it comes to equity investing, the sunny days have tended to
outnumber the bleak ones.
Sincerely,
«representativename»
«representativetitle»
*Investors cannot invest directly in indexes. The performance of any index is not
indicative of the performance of any investment and does not take into account the
effects of inflation and the fees and expenses associated with investing.
1 - cnbc.com/2015/08/21/the-associated-press-qa-what-a-stock-market-correction-means-to-you.html [8/21/15]
2 - money.cnn.com/2015/08/21/investing/stocks-market-lookahead-august-21/index.html [8/21/15]
3 - thestreet.com/story/13263507/1/stocks-end-brutal-week-as-market-nears-correction.html [8/21/15]
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