Happy New Year! Welcome to the worst historical start of Wall Street in 120 years. January, 2016 is characterized by precipitous drops and panic. Many investors still remember the sting of 2008, but this year seems most highly correlated with the oversupply in the oil markets and pressure on current prices. The correlation doesn’t really make any sense to Wall Street historical statisticians; however, I think I get it. Simply, the lower pricing in oil reflects how the world feels about global demand. If China, India, and the United States can’t suck up all the available oil with all the people in the world, a dropping oil price might indicate a “recession.” The “r” word is one of the most hated words by global investors because it portends rainy weather in the stock market with no end in sight.
The metrics of January were an S&P 500 index that closed negative (5.07%). Crude oil was down nearly 10% in the month of January, and China’s manufacturing numbers were abysmal. When you throw in the year of an election in the United States and ISIS threats of a global caliphate as an afterthought, the market declines hard. This is what happened.
Our clients are maintaining extremely healthy cash positions so that we can take advantage of some of these monstrous pullbacks. When investors look back over history, they find that periods of sustained volatility such as we are experiencing now are excellent entry points in the market. Because of our strategic approach to equities, we are highly confident that our clients will be the supreme winners in the end. Establishing low basis in securities is primarily executed in times like these. Therefore, as we enter 2016, be strong and of good cheer because these are the times that propel you way beyond the average clientele of Wall Street.