Message from Jon
The beginning to 2016 has certainly not lived up to historic norms of what to expect during an election year, i.e. quiet and muted start. As a matter of fact, NEVER before in the history of the markets has a year began down like it has in 2016.
According to J2 Capital's appraisal of what the technical charts say is that we have officially began our next bear market cycle. I kind of chuckle at this since we have been in a bear market since 2000. What most fail to recognize about a bear market is that it is NOT the polar opposite of a bull market. In fact, it resembles that of a heartbeat monitor.
You have the systolic and diastolic measures (up and down). We had the down from 2000-2003 and the up from 2003-2007. Followed by the down from 2008-2009 and then the up from 2009-2014. If you understand the conditions of the markets, you are then able to position your investments properly to make the best use of them.
No, I do not mean to go all in followed by all out followed by all in again. I mean, move from conservative to growth back to conservative. This kind of move doesn't happen frequently as referenced above. It moves kinda like a tide would move. We have seen positions of cash range from 90% for some to 10% for others. We are seeing some really great companies going on sale which makes for some incredible buying opportunities while taking profits on those we have been in for some time during our re-balancing of portfolios.
For those who are interested, here is what our indicators are saying right now:
Short-term is now at a 0 Neutral phase from a 2 bear phase earlier this week. With the down today, we will likely see a reversal again but nothing noting we should leave the markets, just noting we should not be buying on dips yet.
Mid-term is still as is with Domestic Stocks in the lead at 29% while bonds are closer behind at 23% and Cash behind that at 21% stating we should be long term still in equities, for the time being. However, we are seeing all indexes are now in a bear confirmed status. This means we will see more volatility and swings with possible continued downward pressure.
What does all that mean in laymens terms? Be patient, remain calm and realize the market is going to have years of up followed by years of down and that is normal. Opening up down for 2016 doesn't indicate a disaster on the horizon by any means. "When others are fearful, we get greedy and when others are greedy, we are fearful!" Sound advice by the greatest investor alive!
Till we speak again, stay warm!
sources: j2capital, spirestocks, dorsey/wright, yahoofinance
Stocks End Rocky Week Down
WEEKLY UPDATE - JANUARY 19, 2016
Stocks closed down again Friday ahead of the long holiday weekend after disappointing earnings, more China worries, and plunging oil prices added to fears about slowing global growth. For the week, the S&P 500 dropped 2.17%, the Dow fell 2.19%, and the NASDAQ lost 3.34%.
Persistent lows in oil prices due to the combination of a supply glut and slowing global demand for oil. After plummeting for more than a year, oil prices have now hit 12-year lows below $30/barrel. Cheap oil is a boon to consumers who pay less at the pump, but it hits oil producers and ancillary sectors hard.
A Chinese economy in transition from a manufacturing and export-led high-growth period to a more stable, mature model based on services and domestic consumption. We've never seen a hybrid economy quite like it - halfway between Communism and Capitalism - undergo such a shift. The issues at stake are serious: Can Chinese leaders usher in a new period of growth without sending the economy into recession? Can China's immature financial sector keep up? Answers will come eventually, but we can expect a lot of uncertainty along the way.
We should also keep in mind that markets have enjoyed multiple years of fairly reasonable volatility. Since volatility events tend to occur in clusters, it's not so surprising that we're seeing back-to-back events in financial markets.
Have stocks hit bottom? We can't know for sure. This week, we'll probably see more poor data out of China that could continue to rattle markets. However, it's possible that earnings season may help turn the tide. While Q4 profits are expected to be down on lower revenues, the bar may already be set so low that earnings surprises could give stocks a boost. When negativity is already baked into stock prices, even small surprises can shift investor sentiment.
Bottom line: Market corrections happen. They can be stressful and can test your resolve as an investor, but they are normal and healthy. We don't know how long this correction will last or how low markets will go, but we are continually monitoring markets and will suggest prudent changes to investing strategies as necessary. If you have questions or concerns about your portfolio, please reach out to us, we'd love to hear from you.
Monday: U.S. Markets Closed for Martin Luther King, Jr. Holiday
Tuesday: Housing Market Index, Treasury International Capital
Wednesday: Consumer Price Index, Housing Starts
Thursday: Jobless Claims, EIA Petroleum Status Report, Philadelphia Fed Business Outlook Survey
Friday: PMI Manufacturing Index Flash, Existing Home Sales
Gasoline prices drop below $1 per gallon. Residents in some parts of Michigan officially became the first Americans to buy gas for less than a dollar in over a decade. High oil supplies and low demand may lead to more cheap gas this year.
Retail sales disappoint. December retail sales slumped unexpectedly as warmer weather cut into sales of winter gear and cheap gasoline weighed on service station business. After a 0.4% rise in November, sales dipped by 0.1% in December.
Consumer sentiment ticks upward. Despite stock market pullbacks and global worries, Americans' view of the economy and their financial prospects improved slightly in January. Hopefully, that optimism will translate into more spending this quarter.
Business inventories fall. U.S. businesses sold through their stockpiles rather than replenishing as sales slipped. The decline in inventories could weigh on economic growth in the fourth quarter.
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