What a difference a week makes….

Well, I am sure many folks are looking at their investments and going “holy *@#$%.” The S&P500 is down over 11.5% from just a week ago, and almost all the other investment folks have (Small Cap, International, etc.) have been similarly pummeled. Instead of late 2018’s gradual drop down, this was a quick slide into the hole. Ouch.

I actually did a quick update of my investments on Feb 21, just to look at them. I had made some significant moves in January, especially to my income account, and I wanted to make sure I had all my tracking in line for my monthly update. As of Feb 21, I was up 3.14% for the year, having recovered from January’s slight pullback. Things were looking good!

Now, for the year, I am down 5.55%, and have lost a total of $68,977. However, it is all “paper losses” that are offset by my huge gains for 2019. If you remember, I had noted previously that, in order for my annual net worth increase to stay on target compared to the last 18 years, I would have to experience a net loss of 9.6% for 2020. Heck, we are already there – and I have nowhere to go but up!

Seriously, this loss is, in my opinion, temporary. The market was overpriced (S&P  500’s P/E ratio was 25.04 as of Feb 1st – way above its 15-16 average. Even now, as of Feb 28, it is estimated to be 22.23, so it is still historically overpriced. The market sell off is, I think, a reaction to the supply chain interruption caused by eh Corona virus. Without raw materials and finished goods from the east, many companies will not hit their earnings for 1st and 2nd quarters, resulting in this drop in price as Wall Street recalculates potential earnings. By the end of the year, I expect we will be back to where we were back on February 21.

Therefore, it is steady as she goes right now. If I had some money on the sidelines, I would be investing in the market right now – but I dollar cost average and invest every month. I did rebalance at the end of 2019, selling stocks and purchasing bonds. My bond funds are up roughly 2% for February, so that helped even out the blow. The S&P may be down 11.5%, but I am not down as much, due to diversification and rebalancing.

I hope that you will stay the course and recover as well!

Mr. 39 Months

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