Over the last four weeks we have been reminded that volatility and corrections still exist. Back in 2009, you could buy anything and it would make money, but now the rules have changed. The bull market is not over; in fact with this pullback, valuations now are very attractive. Everyone loves volatility when the market goes up but when it goes down fear looms its ugly head. Ebola, ISLE, and oil going down cause some unfounded selling. In fact, I had one client on Wednesday go to cash even though he was only down 2% with the market touching 8%. That was my first indication a bottom was forming.
I have written several times in the past that corrections are part of investing and this most recent was normal very orderly. However, after 40 years of investing I realize that there are people that just don’t belong investing in equities. In the back of my book I have my catch 22 list. The first question is “Do you understand how markets work”. Obviously, even with all my coaching; that client didn’t.