Just as we started to put Greece in the rear view mirror and turn our attention elsewhere, we are now being bombarded by news from China and their potentially slowing economy.
This has certainly grabbed the attention of the global stock market with the US market having its worst week in over 4 years.
What happened: The Chinese stock market has lost significant value over the last few weeks and the government has stepped in and taken measures to try and prevent further losses. This uncertainty about the health of the Chinese economy coupled with the potential for a rise in interest rates in the US were the main drivers behind this weeks setback.
Let’s Put This in Perspective:
1) After today’s losses the US stock market will be around the “break-even” point for the year.
2) China’s economy is still growing, just at perhaps a slightly slower rate than previously expected.
3) In the US, the Federal Reserve tells us our economy is continuing to strengthen and unemployment rates continue to drop below average.
What Do We Do:
For those of you who have been with Stone Pine for a while our answer will come as no surprise…. We stay disciplined and diversified! The fluctuations in the market are a normal part of the investment process. And while diversification doesn’t seem so helpful on a week like this one, it does indeed “soften the blow” and over the long term it has been proven to help provide returns in an efficient manner.
We will continue to monitor the situation closely and if the market were to continue to correct downward it could lead to a rebalancing opportunity that will be determined on an individual basis.
As always, please let us know if you would like to discuss this in more detail. We encourage you to reach out to us if you have any questions.
Lastly we would like to empower you to turn off CNBC, to avoid reading the latest headline on the finance blogs / internet, and to instead enjoy your weekend, golf, dinner, etc.
When you are a disciplined investor with a sound investment process, it is important to remember that these fluctuations are normal from time to time. We certainly understand market corrections can be difficult to stomach, however a consistent approach through difficult market conditions will lead to long term success.