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It’s Just My Opinion – Ed Foy, President & Chief Investment Officer

Deja Vu

The last time that I posted an ‘It’s Just My Opinion’ article was October 15, 2014. It was titled ‘When The Good Turns Bad.’ In that article, which is archived on foyfinancial.com under the What’s New section, I was discussing the single biggest equity market correction of 2014. It was the fourth correction of the year and by the time it was over the S&P 500 fell -9.95%. Then, amazingly, it turned on a dime and recovered the entire six week correction in just two weeks. Mid cap, small cap, and international equities took much larger hits during that correction. It was a rough time for equity markets and we were compelled to take partial defensive positions.

Until today, nothing really inspired me to post an article. The Monthly Commentaries were pretty much summing up my thoughts and, actually, up until the past three days, 2015 has been pretty boring. Equity markets had been contained in a narrow trading range. In fact, the S&P 500’s trading range was only 4.4%, which was narrower than any other six-month range in the history of the index. It was the first year when the S&P 500 had never been up or down more than 4% at some point in the year. Boring was an understatement.

Well, we put all of that data to rest, because in the last three trading days the sleeping giant has awoken, and man, was he grouchy! This morning the DJIA fell 1,086 points in the first two minutes, recovered 990 points by noon, declined 601 points until 24 minutes before the final bell when it jumped 411 points higher in the next 12 minutes before declining into the close with a loss for the day of -588 points. Phew!

Now, as it happened to turn out back in October of 2014, the very day that I wrote that article proved to be the low point of that correction. The DJIA printed at 15,855 that day. We haven’t been in that neighborhood since, until today, when the DJIA closed at 15,871. The low point of the day was 15,370 and occurred in the 2nd minute.

It most certainly looks to me as if equity markets got caught in a computer-driven algorithm trade cascade on the opening this morning. International markets had already had a rough day and it was anticipated that U.S. equity markets would follow suit. We just got a little more drama than was necessary. Still, the DJIA did end up being -3.57% on the day.

Now, it would be nice if this article happened to mark another correction bottom, but it would be absolute pure luck. I prefer to make my own luck. So once again we have to address risk management approaches. And now I find myself longing for that boring equity market.

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