A Crazy Start to 2016

January 4, 2016

By midday, the Dow Industrials were on pace to have the worst first trading day of the year since 1932. 

Yet, just after the close of the markets, the Dow Industrials were down just over 1.5%

The decline started overnight out of China which took that country’s stock market down some 7%.  This triggered new circuit-breaker rules designed to limit selling.  The Chinese government also pushed down the value of the yuan.  This is not a good sign for confidence in that country’s economic health.

What a way to kick off the new year!

Reaction to China’s decline hit stocks hard here at home, yes. But there is no reason to panic at this point.  Stocks are often volatile at the end or the beginning of a new month.  This is especially true at the end or beginning of a new year.

Still, the volatility and aggressive selling we’ve seen to start 2016 is something that I think we’ll see more of this year.  I also think we are likely to see big up days of the sort that are a virtual flipside of today’s coin.  Much of what I read suggests that 2016 is a stock pickers market, not simply buy and hold.

Fortunately, the results tend to be a lot smoother when you invest in stocks that display outstanding financial metrics.  That means strong revenue, strong earnings and particularly strong free cash flow.  Those are the very traits strong portfolios possess. 

EWS and your money managers take your money management seriously.  So, if you’re panicking, let’s talk.  It probably means your risk tolerance is not in line with your investment portfolio.