Client Communication Briefing

February 28, 2007

 

Market Volatility

 

Yesterday’s stock market sell off is a reminder that markets have risk.  The Dow Jones Industrial Average declined by over three percent.  The trigger seems to have been the concerns over risks in some of the more risky markets like China and the sub-prime mortgage market.  Chinese stocks started the decline, dropping over nine percent in one day.  The other concern that is having an impact on investors’ confidence is mortgage defaults.  We are seeing a rise in foreclosures of sub-prime mortgages as interest rates rise and real estate values fall.

 

These events along with an above average run up in stock prices set the stage for yesterday’s sell off.  Is this just a one or two day event or does the sell off signal the start of a period of declines?  No one knows the answer.  It is normal for stocks to decline after a recent run up.  After all, we have had a gain of over twenty percent over the stock market lows of last June.  A decline of up to ten percent at this time would come as no surprise. 

 

Our response to rapidly changing markets is to stick to the plan we have developed for you.  Those plans are designed around your risk tolerance, time horizons and investment objectives.  We stick to the plan and do not let short term market volatility drive our decisions.  As always, keep us informed of any changes that may be happening in your life so we can respond appropriately.

 

If you have any questions or concerns, give us a call.

 

Michael Haubrich, CFP