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Keeping Perspective When the Market Drops

by Robert W. Tull | February 2, 2018 | Financial Planning

We are two days into February 2018, and we have viewed something not seen in a while on TV screens – the color red on the market reports. The market began the year very strong and there was much talk about a robust 2018. We continue to believe this is the case based on the strong earnings from companies reporting to-date.

To put this in perspective, I remember speaking to clients on October 19, 1987, when the Dow was at 1,734 rather than the current 25,520 points, and a 500 point drop meant a 22.6% plunge, versus the 2.5% drop experienced today. So when you see the number flash on your screen, place that number in context, as large point drops do not necessarily represent as big of a percentage drop as you may think.

We believe that setbacks can occur and are normal; rising interest rates are likely the reason for the recent drop. The economic expansion will most likely continue, with nothing over the past week suggesting otherwise. Of course we would like for stocks to always go up in a straight line, but that is not what history has shown. When investing for the long-term, we may frequently experience volatility in the short-term. Remember…despite what the red on the TV screen tells you, consider the percentage change and not just the point change.

Robert W. Tull, Jr. is founder and president of Tull Financial Group, and a CERTIFIED FINANCIAL PLANNER™ professional in Chesapeake, Virginia. With more than 30 years of financial planning experience in Hampton Roads and beyond, he focuses on the areas of investment management, and retirement and estate planning. He also provides highly individualized personal and business advisory services.

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