The first quarter of 2016 served as a great reminder that what goes down can also go back up.

May 3, 2016 | By: Mark W. Vermillion

In the over 50 quarters we have been providing investment management services we don’t remember a quarter that illustrated this important reminder so neatly and succinctly! Some are more wobbly than others, but most first quarter stock charts look a lot like a wavy and shallow version of the letter “V”.

See the update letter we sent our clients last week (download below) to read our perspective on the unique first quarter. After our comments about the markets and some interesting charts you will find a helpful sports analogy article called “Free Throws” by Dimensional’s Dave Butler.

Here are a couple excerpts from our letter:

“The overall positive first quarter numbers – below and in most of your performance reports - certainly do not reflect the wild ride we experienced! As you’ll vividly remember, the market got off to a bad start from the first trading day of 2016 and worked its way steadily downhill until February 11th, when US stocks bottomed over 11% below where they started (Russell 3000 Total Return Index; source: quotes.wsj.com).” 

“Sellers in February locked in losses; patient investors who waited a mere five weeks found themselves made whole. The market's up and down cycles rarely occur this quickly or neatly, but they have typically followed this pattern: periodic declines followed by full recoveries and new profits. During a downturn, pessimists tend to think that the trend down will continue and see little hope of an upturn. Each day the market falls seems to confirm this. Fortunately, as we saw again in February, daily declines tell us nothing about the future. It's just as likely that the trend will reverse and markets will improve. The first quarter strongly reinforced and reminded us that:

  • The market's day-to-day movements tell us nothing useful about its future moves.
  • It isn't worth getting worked up about portfolio performance during temporary downturns.
  • What goes down can also go up.
  • Solid cash reserves are wise and allow investors to more comfortably weather volatility.” 

Download our full 2016-04-25 Q1-16 Quarterly letter here. As always please email us here or call us at 503-304-9248 with any questions.

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