The Northern Star Newsletter 3/2/20 - What in the World Is Happening?

MESSAGE FROM JON                                                                         

Well, we are certainly seeing a global over-reaction to the coronavirus fears, aren't we? Let's think this through here and analyze what it is that we know and not entertain what we fear happening or might unfold or any other "OMG" that the media would have you buy into at present.  I have been saying that we are due for a correction for the last 2 years now, we just couldn't have identified what would be the catalyst.

According to Worldometers.info, we know that there are 82,742 confirmed cases of the virus in the world. There are 2,817 deaths as of February 27th, 2020. We know that represents 3.4% rate of fatality. So that means that 96.6% of everyone who contracts it will live through it.1

We know that out of the 82,742 cases, 81,169 are in China and South Korea right now.1

Italy, Iran, Japan, and Diamond Princess (cruise ship) hold 1,974 cases, and then there is the rest of the world.1

We believe that the reason that Wall Street is having a corrective moment right now is that when companies have to send workers home for a day or two due to illness, their production (whatever that is) isn't really affected and jobs can be re-routed to co-workers and covered until affected workers return. However, when a worker is out for 4-6 weeks, and there are enough of those that you cannot simply spread the work to others because they too are out for 4-6 weeks...you get supply chain issues which if not handled properly, can cause difficulty meeting demands, which causes a ripple effect in the GDP and on and on and on...

China is one of the largest "manufacturing warehouses" in the world supplying millions of companies with parts and labor at present. This can explain why Wall Street is seeing the possibility of said companies not being able to meet their customer demands right now in our opinion.

The market condition before and now:

The indicators that we follow currently show the pecking order is still suggesting stocks both domestic and foreign followed by bonds, cash commodity, and currency holdings as of the close of business on the 27th of Feb 2020.  As the pecking order changes, we will adjust and rebalance our portfolios to reflect those changes.

We also see the Stormguard measure showing a 0.99% measure into the Bullish market trend down from 1.20% along the same timeline.2

As I had said in my previous newsletters, this market is over-cooked and needs to correct a bit.  Ramping up risk in a market that is 12 years past the last major recession and has not really seen a correction of any significance since Q4 of 2018 was taking a larger risk than what investors may have probably realized.

The coronavirus is, in my opinion, what we would describe as a black swan event-an event that is unplannable and unknowable. 9/11 is the closest event that almost everyone reading this would be able to remember living through. Even though they aren't the same tragic events by any measure, it's a very similar response by Wall Street. Black Swans happen and yet cannot be predicted. 

We think that the worst reaction one can have is to panic. The most appropriate way to manage in our opinion it is to put on your thinking cap and logically walk through what we know and what we do not know. Act on what we know to be true and let go of what we do not know and put it in the hypothetical box alongside of what-if scenarios like experiencing a mass shooting in Wall Mart or an F5 tornado in downtown Chicago or Indianapolis.

Stick to your plan and remain calm.

Till we speak again, enjoy your weekend and turn off the news!

Jon

Sources:

1. https://www.worldometers.info/
2. https://alphadroid.com/MyPages/StrategiesAG2.aspx

Stormguard

Notice: Your use of this site is considered evidence that you accept our Terms of Use and Privacy Policy, and is considered equivalent to your signature. AlphaDroid, Merlyn.AI, True

Sector Rotation, StormGuard-Armor, Polymorphic Momentum and Temporal Portfolio Theory are registered trademarks of SumGrowth Strategies, LLC. All materials copyrighted 2016

SumGrowth Strategies, LLC. Neither SumGrowth Strategies nor its AlphaDroid automated investment analysis tool provides financial investment advice specific to anyone's life situation.

SumGrowth Strategies is not a registered investment advisor. Modeled strategy and portfolio performance is hypothetical and does not include fees associated with your account, trading,

or advisor. AlphaDroid is limited to the private and non-commercial use of its professional financial advisor subscribers and their end clients as described further on the Terms of Use page.

About Summit Financial Group of Indiana                            

Jon McCardle is the owner of Summit Financial Group of Indiana based out of Lafayette, IN.  Jon and his team specialize in keeping clients retired once they get there and helping everyone else get there quickly!