The stock market is seriously injured as we enter the initial stage of 2019. Market value destruction has been deep and wide. We continue to maintain a defensive investment posture in response to the tantrum the market seems to be staging.

During the 14 trading days between December 4 and Christmas Eve, the Dow fell over 4200 points, a 16% decline. Even after a rebound since Christmas, major indices linger near bear market territory, defined by a decline of 20%.

As of year-end, noteworthy damaged leaders include Amazon (-27%), Apple (-32%), FedEx (- 41%), and Netflix (-40%), some of which are illustrated below.

Despite the abundance of explanations offered by the financial media, the recent capricious nature of the market has everyone unnerved.

The American Institute of Investors said the majority of its members expect stocks to drop further in the months ahead. This is the first negative outlook for this survey since 2013.

Furthermore, Lipper reported that $75.5 billion was withdrawn from mutual funds and exchange-traded equity funds in December and this is a record amount of money removed from the stock market through these vehicles.

Negativity and price drop spells opportunities for investors. No one knows when the malaise will end or definitively how far down the market will go but we do have historical reference points.

An important positive consideration is that today’s economy does not resemble the damaged conditions that existed before the large-scale bear markets of 2000-2002 and 2008-2009. This suggests we can rule out another decline as we had back then.

Although there are some pundits that would suggest otherwise, our economy does not come remotely close to the stress that happened during those phases. This might also serve as a reassurance that the market will not sag much further.

We might even be close to a reprieve. Since the 1987 crash, there have been ten times the market has fallen more than 15%, including this period. Most of those lasted only a few months. The current decline began on October 2 so this 87-day time frame would rank about average in duration for those declines.

Stocks rallied over 1000 points on the DOW after Christmas marking the largest one day gain ever. Hopefully, this is also a positive sign.

One stock that offers clients an attractive opportunity is the shares of Cummins which is trading near its low point. Cummins is one of the world’s largest diesel and natural gas engine and power system provider. Its shares hold many attractive investment features.

The attached link highlights the impactful environmental benefits from Cummins’ new focus on minimizing greenhouse emissions.

https://www.wsj.com/articles/businesss-climate-challenge-getting-customers-to-pay-1544011201

Peregrine Asset Advisers ● 9755 SW Barnes Rd. Suite 295 ● Portland Oregon 97225
503.459.4651 ● 800.278.1420 ● www.peregrineaa.com