Message from Jon
Happy New Year!
With 2018 firmly in our review mirror, we can now look forward into 2019. My reading and data have been offering up quite a smorgasbord of topics, concerns, questions, and, well, more questions.
Will the FED raise or suspend the rate hikes that were once a foregone conclusion for 2019? Will the Trade War get reconciled this year? Will the US economy slow down or slip into a recession? Will BREXIT finally resolve itself in favor of, or against, Britain leaving the EU? These questions are apart from the questions that seem to never stop around President Trump and his code of conduct and seemingly never-ending stream of headlines.
As you might guess, the above is why we pay attention to the data (not headlines) and try our very best to make rational sense of what seemingly is an irrational stream of headlines that vomit all over the public on an hourly basis anymore!
In our opinion, the data suggests that we are in a bear-market condition. As such, we are-and have been since October-positioning client capital in a defensive and protectionist manner.
I spent the better part of last Thursday and Friday sending out emails to clients reaffirming where they are, why they are positioned this way, and what we believe 2019 has in store. 2019 will bear some resemblances to 2018 in that political tensions domestic and abroad will likely manifest in the markets as volatility in our opinion. We also feel that this volatility could increase to the tune of 20-40% leading into 2020, which holds an additional set of concerns and issues that at the moment are not really relevant.
Stormguard is now sitting at below a -3.0% while D/W shows bearish warnings on the majority of the charts we continue to measure & monitor for clients. 1,2
All this information does not automatically invite in a stock market crash or economic recession or anything else. It is simply data we can use to determine the course of action we should take on behalf of clients. Can the market rally during these conditions? Sure. Said rallies tend to be weaker and live shorter than when they happen with stronger undercurrents that promote them. Like I have said for the last quarter to clients: I am okay giving up 5 or even 10% upside so long as the 20-40% downside is protected, because I think we are closer to the latter than we are the former at this point!
2019 will for sure be an interesting year-and 2020, well, that will be a horse of a completely different color, I am sure.
Till we speak again, Happy 2019!
Year-End Special Edition: A Look Back at 2018
WEEKLY UPDATE - DECEMBER 31, 2018