A synopsis of recent market activity, a look ahead, and putting it all in perspective

The past couple of weeks the stock market has given back most if not all of the gains of the year, with the latest catalyst being concerns over the economy in China. As it was, the 2nd Quarter of 2015 left investors with much to be desired. As the markets took a pause, they remained in a basic trading range, with much of the concern centered on when the Fed will start to raise interest rates, and the potential effects that it may produce. Does this mean if you are invested, is it time to sell? Or to stay out of the stock market? Not necessarily.

History tells us that over the last six decades, the average time from the first Fed rate hike to the next recession is 33 months, and the median number is 30 months. The futures markets appear to be factoring in a 20% chance of the first rate hike occurring in September, and with an 80% chance of it starting in December. That would historically suggest that the economy will not enter a recession for at least another 2 years plus.

What complicates the situation is that the Fed normally raises interest rates to slow economic growth and suppress inflationary pressures. There is currently not a lot of evidence of inflationary pressures and economic growth is weak at best.

There are only two points in time over the last 6 decades where real economic growth was below 2% at the time of the first rate hike, 1948 and 1980. In 1948 the recession followed 4 months later and in 1980 followed 9 months later. To put that in perspective, if it has normally taken 33 months on average to go from first rate hike to recession at a 3% economic growth rate, then it would take about 11 months on average to go from first rate hike to recession if economic growth was only 1%.

Ultimately the economy has on average gone in and out of recessions once every four years, so we need not fear their occurrence, but rather just ride through them when they occur. For long term investors, we ride through the good and bad times. Clearly the good times are a lot more fun, but we must live through those times where returns are less than stellar and not waver from a disciplined long term plan approach.

Major Market Indices

Below is a summary of Q2’15 performance of some of the major indices:

US Treasury 3 Month T-Bill: 0.03%

Barclay’s US Aggregate Bond Index: -1.68%

Barclay’s Municipal Bond Index: -0.89%

S&P 500 Index: 0.28%

Dow Jones Industrial Average: -0.29%

MSCI EAFE (International Equities): 0.62%

MSCI Emerging Markets: -0.69%

Russell Mid-Cap: -1.54%

Russell 2000 Index (Small-Cap Stocks): 0.42%

Morningstar Commodity Index: 4.66%

Credit Suisse Long/Short Equity: 1.66%

Morningstar REIT Index: -10.00%

This update was provided by Landmark Wealth Management, LLC, a Securities and Exchange Commission Registered Investment Advisory firm that has opened an office located in Ditmas Park, Brooklyn, with an office on Long Island in Melville. The financial advisors and firm principals are Brian Cohen, Chris Congema, CFP®, and Joe Favorito, CFP®.

If you desire an appointment, have any questions on any of this material, or any other financial subjects may relate to your own financial circumstance, please reach out to us at the contact information below:

Sincerely,

Brian Cohen, CCO; email: brian@landmarkwealthmgmt.com; phone: 718-514-1587 and 631-923-2487

Chris Congema, CFP®; email: chris@landmarkwealthmgmt.com; phone: 631-923-2486

Joe Favorito, CFP®; email: jfavorito@landmarkwealthmgmt.com; phone: 631-930-5336

Direct office email: info@landmarkwealthmgmt.com

Direct phone: 718-514-1587 and 631-923-2485

Landmark Wealth Management, LLC (www.landmarkwealthmgmt.com). The firm is located in the Ditmas Park section of Brooklyn (by appointment only: please call 718-514-1587) as well as in Melville, NY at 900 Walt Whitman Road, Suite 208.

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This communication is from Brian Cohen, Chris Congema, CFP®, and Joe Favorito, CFP®, financial advisors at Landmark Wealth Management, LLC, a Securities and Exchange Commission Registered Investment Advisory firm. The information in this blog is not intended as tax or legal advice, and it may not be relied on for the purpose of avoiding any federal tax penalties. You are encouraged to seek tax, legal, or investment advice from an independent professional / financial advisor. The content is derived from sources believed to be accurate. Neither the information presented nor any opinion expressed constitutes a solicitation for the purchase or sale of any security.