Last year, stocks marched higher with only minor pullbacks. When the year ended, the largest peak to trough decline for the S&P 500 Index was just under 3% (St. Louis Federal Reserve data on the S&P 500). It was a year that lacked turbulence and one that rewarded diversified investors. Since the beginning of February, volatility has returned.
After nearly a decade of leaving the federal funds rate at zero percent, the time finally came on December 16, 2015: The U.S. Federal Reserve (the Fed) started raising the federal funds rate with modest increases ever since. What do these rate changes mean to your financial well-being? Is there anything you should “do” to your investment portfolio when they occur?
February’s early slide saw the S&P 500 Index lose just over 10% in value–an official correction–in just nine trading days. That’s right–nine trading days from an all-time high to a 10% decline which, according to LPL Research, was the quickest on record. Moderate economic growth at home and abroad has been fueling corporate profits.
Any thoughts that 2018 might start with a pause in the bull market were quickly dispelled in the first week of the year. A “buy the rumor, sell the news” view on tax reform has shaken out to be more aptly described as buy the rumor and buy the news. In my opinion, the credit goes to the dramatic reduction in the corporate tax rate—from 35% to 21%, beginning in 2018.