WT Wealth Management - Market Update

Over the past several days we have received a number of phone calls from clients: some nervous, some curious and most simply seeking a calm reassuring voice. Accessibility and communication is one of the many client-centric ways we differentiate ourselves from other Registered Investment Advisors. We work for you. In fact, every advisor at WT Wealth Management enjoys hearing from clients and understanding how they feel. It makes us better in our role of understanding each client individually and uniquely.

In early October we distributed a Special Market Update providing our view point on the then recent correction. Since October both much and nothing has happened. The "much" is that the market correction has persisted into late December. The "nothing" is that the US economy has remained healthy. In fact, on Wednesday, Federal Reserve Chairman Jerome Powell released this statement after the FMOC raised interest rates for the 4th time in 2018.

Information received since the Federal Open Market Committee met in November indicates that the labor market has continued to strengthen and that economic activity has been rising at a strong rate. Job gains have been strong, on average, in recent months, and the unemployment rate has remained low. Household spending has continued to grow strongly, while growth of business fixed investment has moderated from its rapid pace earlier in the year. On a 12-month basis, both overall inflation and inflation for items other than food and energy remain near 2 percent. Indicators of longer-term inflation expectations are little changed, on balance.

In a vacuum that statement reads positively and highlights a healthy U.S. economy. In fact, it seems to fit the definition of a "goldilocks" economy: low interest rates, full employment, low inflation and an expanding economy. Recessions are not born out of an economic health and wellness check like we received three days ago. The US economy is 72% consumer driven and when there is full employment people spend. Sure, higher interest rates may lead some consumers to postpone buying a home and it may make some revolving debt weigh heavier on the consumer. However, having the major equity indexes down by double digit percentages so far this month seems out of step with the underlying economic facts.

So how do we explain the persistent market correction we are experiencing? Market participants appear to be re-pricing assets as a result of higher interest rates, a tighter monetary policy and projected long-term slowdowns of domestic and world economies. Add in the uncertainties of the trade war with China, a new congress set to convene after the first of the year, year-end tax loss selling, and a general sense of fear and the recipe has proven to be enough to keep buyers on the sidelines and any rallies nearly impossible to sustain.

Many people have heard us say that markets overdo everything... both good and bad. We continue to maintain that this correction is vastly overdone. You may have also heard us say that investors have the uncanny habit of doing the wrong thing at the wrong time. We'll go on the record and say that "this is not the time to sell". Markets seek equilibrium and when things get overdone they balance out. Savvy investors are rewarded by being patient and sticking to the plan.

Let's look at the recent 10 year history to see how the market bounced back after a correction*.

In the dark days of 2009, the S&P 500 was down 8.6% and 11.0% from January to February before rising by 8.5%, 9.4% and 5.3% from March to May.
From May to June 2010, the S&P 500 fell 8.2% and 5.4%, but then rallied in July with a 6.9% gain.
In 2011, a period many deemed to be a mini-recession, the S&P 500 fell steadily for 5 consecutive months from May to September (1.4%, 1.8%, 2.2%, 5.7% and 7.2% respectively) before posting a 10.7% recovery in October and then gaining an additional 4.3%, 4.1% and 3.1% from January to March 2012.
In 2015, when the S&P 500 gave up 6.3% and 2.6% in August and September, it responded with an 8.3% return in October.
And just earlier this year, after the S&P 500 declined by 3.9% and 2.7% in February and March, it posted gains of 0.3%, 2.2%, 0.5%, 3.6% and 3.0% from April to August.

* A correction is defined here as 2 or more successive months of substantial negative market returns (price returns only, does not include dividends).

So what we are seeing today isn't unprecedented. And these fluctuations downward are consistently accompanied by recoveries and returns that investors seek from the equity markets.

There is a team of advisors at WT Wealth Management that are passionate about what we do and the clients we serve. If you feel the least bit uneasy please contact your advisor for a phone call or meeting. In the event you determine together that your risk tolerance has truly changed, and new investment decisions are not based only in emotion, we will happily work with you on making allocation changes as asset prices recover and we enjoy some of the bounce back that inevitably occurs.

Happy Holidays

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At WT Wealth Management we strongly suggest having a personal financial plan in place before making any investment decisions including understanding your personal risk tolerance and having clearly outlined investment objectives.

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WT Wealth Management is an SEC registered investment adviser, with in excess of $100 million in assets under management (AUM) with offices in Flagstaff, Scottsdale, Sedona and Tucson, AZ along with Jackson Hole, WY and Las Vegas, NV. WT Wealth Management is a manager of Separately Managed Accounts (SMAs). With SMAs, performance can vary widely from investor to investor as each portfolio is individually constructed and managed. Asset allocation weightings are determined based on a wide array of economic and market conditions the day the funds are invested. In an SMA, each investor may own individual Exchange Traded Funds (ETFs), individual equities or mutual funds. As the manager we have the freedom and flexibility to tailor the portfolio to address an individual investor's personal risk tolerance and investment objectives – thus making the account “separate” and distinct from all others we manage. An investment with WT Wealth Management is not insured or guaranteed by the Federal Deposit Insurance Corporation (FDIC) or any other government agency. Any opinions expressed are the opinions of WT Wealth Management and its associates only. Information offered is neither an offer to buy or sell securities nor should it be interpreted as personal financial advice. Always seek out the advice of a qualified investment professional before deciding to invest. Investing in stocks, bonds, mutual funds and ETFs carries certain specific risks and part or all of an account's value can be lost. In addition to the normal risks associated with investing, narrowly focused investments, investments in smaller companies, sector and/or thematic ETFs and investments in single countries typically exhibit higher volatility. International, Emerging Market and Frontier Market ETFs, mutual funds and individual securities may involve risk of capital loss from unfavorable fluctuations in currency values, from differences in generally accepted accounting principles or from economic or political instability that other nations experience. Individual bonds, bond mutual funds and bond ETFs will typically decrease in value as interest rates rise. A portion of a municipal bond fund's income may be subject to federal or state income taxes or the alternative minimum tax. Capital gains (short and long-term), if any, are subject to capital gains tax. Diversification and asset allocation may not protect against market risk or investment losses. At WT Wealth Management, we strongly suggest having a personal financial plan in place before making any investment decisions including understanding personal risk tolerance, having clearly outlined investment objectives and a clearly defined investment time horizon. WT Wealth Management may only transact business in those states in which it is registered, or qualifies for an exemption or exclusion from registration requirements. Individualized responses to persons that involve either the effecting of transactions in securities, or the rendering of personalized investment advice for compensation, will not be made without registration or exemption. WT Wealth Management's website is limited to the dissemination of general information pertaining to its advisory services, together with access to additional investment-related information, publications, and links. Accordingly, the publication of WT Wealth Management's website should not be construed by any consumer and/or prospective client as WT Wealth Management's solicitation to effect, or attempt to effect transactions in securities, or the rendering of personalized investment advice for compensation, over the internet. Any subsequent, direct communication by WT Wealth Management with a prospective client shall be conducted by a representative that is either registered or qualifies for an exemption or exclusion from registration in the state where the prospective client resides. A copy of WT Wealth Management's current written disclosure statement discussing WT Wealth Management's registrations, business operations, services, and fees is available at the SEC's investment adviser public information website (www. adviserinfo.sec.gov) or from WT Wealth Management directly. WT Wealth Management does not make any representations or warranties as to the accuracy, timeliness, suitability, completeness, or relevance of any information prepared by any unaffiliated third party, whether linked to WT Wealth Management's web site or incorporated therein, and takes no responsibility therefor. All such information is provided solely for convenience purposes and all users thereof should be guided accordingly.

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