Over the past few days you have inevitably heard that the markets have declined in value. We would also likely believe that this message has likely been delivered to you in a way that highlights fear, and further impending doome andwhile ignoresing the fact that markets go through cycles and need corrections like this to sustain healthy growth. Corrections like this are a good thing when a market has grown substantially and rapidlyfast.
To make an analogy, an arborist would tell you that some of the fastest growing trees have the weakest root structures and those trees stand the most risk of falling in a storm. If you choose to plant one of these fast growing varieties you might be told to “score” the root ball by lightly cutting in with a shovel around the root ball to encourage growth. This causes the root structure to repair the damage by growing back in those areas with stronger roots. Structural pruning is the process of trimming the branches of the trees that have grown quickly back so that the trees’ energy is used to goes into strengthening its core so as it so as it growss larger, it grows sustainably.
As for this particular market event we can’t tell you where the floor is or how the timing will play out. What information could there be that we do or don’t know yet. What we do feel confident about is the system as a whole and the patterns the market has followed. Timing and trajectory certainly change but the pattern has always rhymed.
Watching markets rise is exciting and makes us happy and while the same cannot be said for the declines, we should know they are coming, and therefore be invested not necessarily to avoid them but such that this normal cycle doesn’t disrupt our long term plans. This involves ensuring that the investment objectives of our accounts are appropriate for our long term goals, and that we keep our perspective on the long term expectations, and not the fear or greed promoted by those inwith the media.