Slight downturn nothing to fear

Your investment statements don’t look very good this month do they? That last week of July the markets lost about 2 percent, so you are likely a couple of shekels short.

The broad market in the United States is still up around 4 percent year to date so we are OK to this point as I write this Wednesday.

I have been preaching for months that a correction was overdue and we should be prepared. The reality is that a 10 percent correction would not be unusual, and a 20 percent correction would historically normal.

Since 1945, the markets have corrected 20 percent every five years on average. That does not mean every five years, it just means on average.

If you are upset over the recent downturn, I suggest you have a chat with whomever advises you on your investments. Perhaps you are not on the same page.

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Really, we are spoiled. We have averaged about a 20 percent yearly return over the past five years so we are used to it.

A short downturn like this, assuming it remains short, is nothing to be concerned about. If it turns into a rout, then that is a different matter.

Investors sometimes forget that historically this is not a good time of the year for markets. August is a bad month going back in history. This is just a crappy time for the markets.

I think you should go on vacation.

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What should you be doing now? Good question. I spend this time of the year beginning to position my account for the fall. Late fall and early in the new year are historically strong periods so I try to get ready for that.

You have probably made some bucks in the past few years so it might be time to take a look and see if you need to take some action.

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If I had my way, no one could look at their statements more than once every six months. Go trekking in the Alps or something.

People who insist on logging in and checking their account balances every day set themselves up for disappointment. I hate to be disappointed so I hardly ever look at my account.

I figure three or four times a year is enough. I can do what I need to do then.

More often and I am making short term decisions and normally that is not wise.

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What’s happening? Let us take a look.

As I said, the broad market in the U.S. is up more than 4 percent year to date. The Dow Jones industrial average is just barely positive by .34 percent. The NASDAQ is up 4.22 percent, and the Standard and Poor’s 500 is up 5.2 percent.

We’ve had some weakness in mid and small cap stocks. The S&P Midcap 400 is up 2.75 percent and the Russell 2000 index of small companies is actually down almost 3 percent. That’s why the broad market is not showing higher numbers.

The DJ Global ex-U.S. is up about 2 percent year to date. India has caught fire up 22 percent and our buddies to the north in Canada are up 11 percent.

Canada has a lot going for it. Natural resources are really playing a positive part in its economy.

Interestingly, there are no double digits losses in the major foreign country markets. Only 6 of those 30 markets are down year to date, so if that continues, it may bode well for us.

Commodities have been all over the place. Wheat had almost collapsed; at one point it was down 23 percent, but has started a rally.

Most food related commodities have been weaker. The DJ Commodity index is down almost 3 percent. Gold is doing OK, up more than 6 percent. Natural gas is down about 7 percent and crude oil is off about 1 percent.

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Have you noticed the cheaper gasoline prices? I was in Ohio the other day and gas prices were a whole bunch cheaper than they are here.

So enjoy the rest of the summer. The stock market will do what it does. Remember, snow is on the way.

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The wife and I were having dinner the other night, and she said she thought I had added a few pounds over the past weeks. I told her that it was my shampoo.

“And what would your shampoo have to do with it?” she asked.

I said, “Right there on the label darlin’ it says: Adds body and volume.”

She doesn’t think I’m funny.

Howie Pentony is a Saxonburg client portfolio manager.