Kris Venezia, Market Analyst
There is certainly a lot going on right now. We are in earnings season, where companies give their quarterly reports. There has been some interesting nuggets out of that. Inflation and some economic indicators have certainly been intriguing to start the year.
But I want to focus on a table I came across recently. Believe it or not, we are in a midterm year. Another year where politics will come into the focus. I do not think this downturn to start the year is because of midterms, but it is important to note that election years have more volatility.
Going back to 1950, midterm years have seen a big dip in them. On average, there has been a dip of around 17% in a midterm cycle. The striking detail of the table is the performance after the drop.
The average performance a year later, following a drop, is over 30%. It highlights how important it is that we as advisors keep you invested during these down times. It also points out to us that we need to nibble and take advantage of these declines when they present themselves.
The tendency when times get hard is to cut and run. After a great year like 2021, there is that mindset of leaving the market while ahead. But we know that historically, cutting and running, especially during midterm years, is not a smart move.
Daryl Eckman, President
We had a terrific 2021. Our clients saw healthy returns, but, so far in January we are giving some of that back. We will see how January ends up, but it brings up a signal investors look at.
January tends to be an optimistic period. People usually put money into retirement accounts and other accounts at the start of a new year.
The January effect can sometimes be an indicator for how the year is going to go. We have been cautious and looking for opportunities. October typically tends to be the tough month for investors because of things like tax selling.
There are reasons for the January sell-off, they include global issues with conflicts and the Federal Reserve has started to shake things up.
If we do go through an extended difficult period, which we stay prepared for, it's important for you to know that we have a plan in place.
We feel like this drop is a good thing for us because it allows us to do some buying at attractive levels. We know in history there have been negative returns for a full year. We have not forgotten that, but we know in the long term, buying at lower levels works out.
Warren Buffett is a great example of someone who has spent his career taking advantage of down times. We certainly monitor his behavior and will take advantage of the tough times.
We also want to announce that we are changing our name. We are going back to Eckman Wealth Management. I am not an egomaniac, but the name Eckman Wealth Management was liked more than First Choice.
Finally, I want to thank you for working with us. We take the relationship very seriously. We are constantly trying to improve to find more ways to help you.
We also are open to hear from you at any time. If you are feeling unsure about the market, especially with market being down, don't be afraid to reach out.
We have been gently buying, but we are being extremely careful. We do not want to get overexposed if things stay rocky for a longer period of time.