Worst Quarter in Three Years

I was reading a Wall Street Journal article over the weekend about experiencing the worst quarter in roughly 3 years for stocks.  Specifically, the S&P 500 was down approximately 14% this past quarter [3^rd quarter 2011].  The article was comparing this quarter’s fall to 1^st quarter 2009 when the S&P 500 was down almost 12%.  The article also pointed out that the DOW is currently in a 5 month losing streak, which is the longest since February, 2009. The more I read, the more I gained a sense of peace.  The reason is the longer we experience these periods of negative volatility, the more likely it is that the turnaround is [very soon to follow.] 

Looking at a case study going back to 1^st quarter 2009, [we see the first quarter of 2009] was down about 12%.  The 2^nd quarter followed with a plus 15% and the third quarter was another plus 15%, while the last quarter ended with roughly plus 6%.  Cumulatively, this amounts to an almost 40% rebound following that 1^st quarter loss of almost 12%. 

Reflecting back to 1^st quarter 2009, no one was talking about a potential rebound or anything positive about the economy [or equities].  All that was heard was “doom and gloom”, and yet strong performance bounced back.  We can always expect a return; we just can’t predict when exactly that will occur.

Another thought I have about the current [media entertainment] talk is, “where is this recession they keep referencing?”  Manufacturing, production, employment activity and most recently, construction spending are all up.  Anything above a reading of 50 indicates economic growth, not construction.  This “recession” is simply not a reality, [but rather entertaining hype to keep viewers watching.]

Lastly, producing wealth does have some requirements.  First, an investor has to have appropriate intentions in order to produce enough wealth to protect purchasing power throughout 30 years of retirement.  The second requirement is an appropriate mood.  Long term investment intentions require a mood of resolve, dignity, [maturity, responsibility] and peace.  Finally, producing wealth requires superior practices such as staying fully invested, [rebalancing,] owning equities, and developing a well-diversified, strategically allocated portfolio.  Remember, hold your intentions, moods and sound practices to produce the wealth that you need.

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