Monday morning, Monday morning couldn't guarantee

     Monday morning the Dow Jones Industrial Average** lost over 1000 points at the open following the continued fall in China’s stock market. Many market watchers were hoping the China Central Bank would act over the weekend to slow their markets current decline. When the China Central Bank did not act as market watchers hoped, other markets took this as a reason to sell off. As the markets decline it may set up some opportunities.

-   Prices of dividend paying stocks are now at levels which we have not seen for years.

-   Companies which do most of their business in the US should not be as affected by happenings throughout the world.

-   Real estate markets could get a shot in the arm as interest rates have fallen causing the average 30 year mortgage down to the 3.75% range.

     The reports by the news media may be unclear. Many people believe the financial markets are going higher while just as many are reporting the financial markets are heading down.  Because of the contradiction in views, it is important to look at the facts, let’s see if we can clarify the numbers to gain some insight into the markets.

Q2 numbers as of June 30th 2015:1

1. Current S&P* forward price to earnings ratio of 16.4.

2. The 25 year average of forward price earnings ratio of the S&P* is 15.7 with a high of 24 and a low in 2008 of around 9.

3. Q2 Corporate earnings came in at or near targets with Healthcare reporting the highest year- over-year increase in earnings of all ten sectors.

4. As of August 24, 2015 the Dow Jones Industrial Average** is down over 1500 points since July 16, 2015.

5. Interest Rates as of August 19, 2015 for the 10 Year US Treasury Bond*** are under 2.1%

6. Oil prices are at a low of around approximately $38 dollars a barrel as of August 24, 2015

     Over the past few months the Global back drop of the negotiations with the debt crisis in Greece and China devaluing its currency in order to make exports more attractive may have created fear. During the same period of time the price of a barrel of oil dropped to a very low price, while the retail price at the gas pump remained relatively high.  Interest rates, which most people believed were going to rise, have instead come back down. This has put mortgage rates back under 4% which could be a plus for the real estate market.  Each of these factors may have contributed to the decline in the Dow Jones Average. If corporate earnings continue to report close to estimates and interest rates remain low, the only unresolved issue is fear. After looking at the numbers, my advice is to continue to meet and speak with us regularly.

     In my nearly 30 years in this business we have experienced several declines. In 1987 the Dow Jones Industrial average was a little over 2000 now it is close to 16000. Maintain a diverse investment portfolio and stay the course. Sometimes staying the course is harder than jumping ship, but in my experience those that keep their eye on the long term goals and not short term setbacks will come out ahead in the long run.

     Take advantage of our new integration's and financial planning; please schedule your personal appointment by contacting us via email or telephone john@marketcapitalmanagement.com – 760-434-3575 ext. 101

John H. Heil, President, Retirement & Wealth Planning, CA Insurance  Lic. #0A52827

Citations

1 www.yahoo.finance. August 20.2015

*The S&P is a market-cap weighted index composed of the common stocks of 500 leading companies in leading industries of the U.S. economy. **The Dow Jones Industrial Average (DJIA) is a price-weighted index composed of 30 widely traded blue-chip U.S. common stocks. ***The 10-year Treasury Note represents debt owed by the U.S. Treasury to the public. Since the U.S. Government is seen as a risk-free borrower, investors use the 10-year Treasury Note as a benchmark for the long-term bond market.

You cannot invest directly in an index. Diversification does not guarantee profit nor is it guaranteed to protect assets. Investing involves risk including the potential loss of principal. No investment strategy can guarantee a profit or protect against loss in periods of declining values.

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