The Dow was down 4.6% or over 1100 points! This was the largest point loss in history, but does not rank in the top 20 as a percentage loss.
The question is when to buy or add? We alluded in our Friday’s blog, that any further pull-back from last week’s turmoil would present an opportunity. We still believe that to be true. As of Feb. 5, 2018 close, the S&P is trading at 17 times 2018 earnings and 15.4 times 2019 First Call earnings. The average P/E ratio is historically around 15. We are still trading at a premium to 2018 earnings, but are no longer trading at a premium to 2019 earnings. We believe a slight premium is justified given the current global economic backdrop. We would start dipping the toe into the US markets, we also think emerging and international markets deserve more attention than the US markets, as those markets can potentially have more upside over the next few years.
As for bonds, the 10 year yield had a huge sell-off today, going from 2.85 to 2.71. We have and will continue to believe that bonds are not a good place for investors seeking total return for a couple of years. This would present an opportunity, if appropriate for the investor, to reallocate to other classes that afford similar volatility.
We encourage you to call us with any questions at 203-210-7814.