August 25, 2015
UPAL has been closely monitoring the volatility and recent dramatic decline in the financial markets. All three primary U.S. indexes have posted significant declines, particularly since Thursday and continuing today. The issues that are adversely affecting these markets are both global and domestic.
Globally, the primary focus of concern is on China. The reported slowing growth in domestic product , devaluing China’s currency by the government, a lowering of expected manufacturing output, strengthening U.S. dollar, and increasing involvement of the Chinese government in the activity of the markets have all acted in concert to erode confidence in the stability of the Chinese economy.
In the U.S., a similar set of conditions are causing concerns about the still recovering and fragile U.S. economy. Among these are: concern is heightened by the Federal Reserve ending the zero interest rate policy, gross domestic product (GDP) growth is at slower than expected rate (at least partially caused by the economic slowdown in China), the negative impact of the overall global economy on the U.S. GDP, record low oil prices, and a continuing strong dollar making it harder for U.S. producers to sell their goods and services in foreign markets.
Based on the current conditions and the July meeting minutes of the Federal Reserve, the probability of a September interest rate increase is projected at 30%.
It is important to remember that over the past six years, the market has not experienced a significant decline or correction. We have been reporting to you increasing nervousness and volatility in the equity markets for the past three quarters. The normal behavior of equity markets includes periods of expansion and contraction. While painful to investors, these contraction periods are necessary for establishing a new floor from which to start a new period of growth.
It can be unnerving when the markets behave this way. In times such as this, our policy is and continues to be that investors should not panic or make large allocation moves especially during a declining market. We advocate for diversification across a variety of asset classes to dampen the effects of market volatility. We also, encourage a re-assessment of risk tolerance as a guide for proper allocation of your retirement account. You can find the Asset Allocation form under the 401(k) Plan tab or at https://upal.com/retirement/401k-profit-sharing-plans/ . If you will complete and fax this form to UPAL, we will review your risk tolerance and be glad to help guide you in making any changes that might be needed to keep your account allocation on target.
As always, we invite you to contact us with your questions or concerns at 918/747-5585.
Kent Butcher, MBA is Vice President & Chief Operating Officer as well as a Registered Investment Advisor Representative at UPAL.
We have done our best to present the information contained in the above article fairly and accurately. However, hypothetical investment performance is still potentially misleading. Hypothetical data does not represent actual performance and should not be interpreted as an indication of actual performance. This data is based on transactions that were not made. Instead, the performance is simulated for illustration purposes only, based on knowledge that was available only after the fact and thus with the benefit of hindsight. Results do not include the impact of taxes, if any. Some investors in UPAL funds may have earned more; other earned less. A complete list of actual investment performance may be found on the UPAL Web site at upal.com under the Investments tab at the top of the screen. Past returns are not necessarily indicative of future results. Future results will likely vary. These materials are subject to change without notice and, due to the rapidly changing nature of the security markets, may quickly become outdated. All materials and information presented are compiled from sources believed to be reliable and current, but accuracy cannot be guaranteed. This information is distributed for educational purposes only, and it is not to be construed as an offer, solicitation, recommendation, or endorsement of any particular security, product or service. Investments are not FDIC-insured and may lose value.
