Message from Jon
As many of you are aware, I am what my mother affectionately refers to as a "momma's boy" and over my lifetime, some of my most profound advice has arisen as a result of our close relationship. As a matter of fact, she gets credit for numerous analogies and sayings I have quipped.
One of the many qualities she has instilled in me is a fierce sense of integrity and honesty, even to a fault. This is why speaking my mind has not always played out in my favor as a youth but now, doing what I do for a living is a very, very good quality to posses.
You will hear the pundits speak about doom and gloom here lately. This market will see oil drop to $20.00 per barrel. This market will make 2008 look like a party. This market, blah, blah, blah. It has been my experience that predicting the future is a fools game. Can we and do we take educated guesses as to what is happening and why so that we can use that information as a guide, yes. So in that vein, here are my two cents as to what we are seeing.
If you do your homework (which I hated as a student to have to do), you will find that a secular bear market typically lasts 18-21 years. A secular bull market lasts approximately 12-14 years. Cyclical bears and bulls have a shorter life span than do secular bears and bulls. A bear market is NOT the opposite of a bull market. It actually resembles a heart beat monitor and therefore can and does experience cyclical bull markets within a secular bear market. (2003-2007 & 2009-2014). I have included a one-page chart from Crestmont that shows the bulls vs bears of the last century and it is quite interesting to see. CLICK HERE
Current Conditions Changed
According to Crestmont Research, Dorsey Wright and J2 Capital, we have entered our next bear market cycle. Well, not a shocker to us at all, but what does that mean though....? It means you can experience under-performance more than out-performance. It means volatility is going to be ever present. It means that you stick to active management vs. a buy and hold approach. It means that diversification will help BUT it must be monitored and maintained vs. put on auto-pilot. Dividends/Income will be important to help boost returns IF the dividend market is not severely hampered by the earnings of companies being less over time.
Does this mean you cannot make money? NOT AT ALL, but it does mean you will need to be more diligent. Also important is aligning your expectations so that you, the investor are not psychologically discouraged by the under-performance that accompanies bear markets. I know that might sound hokey but when your expectations are correctly aligned, you do not grow frustrated and make decisions that you come to regret.
Current Market Strategy
With regard to the markets, we are still seeing a high level of volatility here and have not yet seen any indication we should resume buying on the dips so we stay the course and sit tight.
Till we speak again, enjoy your week!
Stocks End Choppy Week Higher
WEEKLY UPDATE - JANUARY 25, 2016
After a volatile week, markets regained some steam, helped by a recovery in oil prices and some upbeat earnings reports. For the week, the S&P 500 gained 1.41%, the Dow grew 0.66%, and the NASDAQ added 2.29%.
Though the headwinds that roiled markets since the beginning of the year remain, investors found their footing last week and closed out a positive week for the first time in 2016. What caused the uptick in investor sentiment?
Oil prices rebounded to settle at their highest close since the first week of January. While oil is likely to remain volatile, a rally helped investors settle their nerves. Markets also got some help from the European Central Bank, which hinted at further stimulus measures to boost the European economy.
We're also in the early stages of U.S. earnings season, which is stealing attention away from China and oil prices. So far, with 73 members of the S&P 500 reporting in, earnings are already up 1.4% on 0.8% higher revenues. While those aren't stellar results, 71.2% of reporting firms beat earnings estimates, suggesting that corporate leaders set expectations low enough to be able to beat them amid challenging conditions.
However, the overall fourth-quarter earnings picture is likely to be less rosy. U.S. companies are struggling to achieve growth goals in a shaky global business environment, and analysts expect overall Q4 earnings to come in below Q4 2014 levels. What do these challenges spell for investors? Volatility. While we can't predict the future, we think that the first few months of 2016 are likely to be rocky for equities.
Looking ahead, the Federal Reserve's January meeting will take center stage this week, though economists expect them to hold pat on interest rates. Though it's possible that Fed economists may vote to raise rates further, a raft of weak data and ongoing concerns about global growth are likely to trigger a wait-and-see approach.
The first look at Q4 economic growth will be released on Friday, and it's likely to show weak growth in the last three months of the year. Earnings season will also continue, and investors will be looking forward to reports from heavy-hitters like Apple [AAPL], Facebook [FB], and Ford [F].
Will stocks be able to hold the gains and move out of the pullback? We'll see. The news has been negative for several weeks, and it's possible that investors are poised to jump on any positive surprises.
Monday: Dallas Fed Mfg. Survey
Tuesday: S&P Case-Shiller HPI, Consumer Confidence
Wednesday: New Home Sales, EIA Petroleum Status Report, FOMC Meeting Announcement
Thursday: Durable Goods Orders, Jobless Claims, Pending Home Sales Index
Friday: GDP, International Trade in Goods, Employment Cost Index, Chicago PMI, Consumer Sentiment
Housing starts drop in December. Groundbreaking on new houses fell 2.5% last month and permits fell 3.9%, adding to concerns about economic growth in the fourth quarter.
Existing home sales surge. Home resales skyrocketed in December by a record 14.7%, boosted by warmer weather and a stronger labor market that is supporting household formation.
Consumer prices fall in December. A measure of inflation fell last month as lower gasoline prices weighed on energy costs. Tepid inflation could delay further interest rate hikes by the Federal Reserve.
Winter storm Jonas slams East Coast. A blizzard covered large swathes of the East Coast in historic levels of snow. The economic disruption of short-lived storms are usually minor, and Jonas may be a win for grocery stores, though it could be a loss for hourly workers.
3 Reasons to E-File Your Taxes
If you're still one of the few taxpayers who files paper returns, consider these reasons to switch to filing electronically:
Filing electronically helps you get your refund faster. By avoiding mail delays and common filing errors, you save time. Get your refund even faster by combining an electronic return with direct deposit of your refund. According to the IRS, the agency issues 9 out of 10 refunds within 21 days.
IRS e-file is safe and secure and can help you avoid common mistakes. The IRS uses modern encryption technology to protect your sensitive personal information. The agency is also working to help protect taxpayers from refund fraud.
You can use multiple options to e-file. Tax preparation software is available commercially and you can consult a tax expert for help.
Tip courtesy of IRS.gov
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.
Diversification does not guarantee profit nor is it guaranteed to protect assets.
The Standard & Poor's 500 (S&P 500) is an unmanaged group of securities considered to be representative of the stock market in general.
The Dow Jones Industrial Average is a price-weighted average of 30 significant stocks traded on the New York Stock Exchange and the NASDAQ. The DJIA was invented by Charles Dow back in 1896.
The Nasdaq Composite is an index of the common stocks and similar securities listed on the NASDAQ stock market and is considered a broad indicator of the performance of stocks of technology companies and growth companies.
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The Dow Jones Corporate Bond Index is a 96-bond index designed to represent the market performance, on a total-return basis, of investment-grade bonds issued by leading U.S. companies. Bonds are equally weighted by maturity cell, industry sector, and the overall index.
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