Message from Jon
Devin left for basic training Tuesday the 11th for the Air Force. It has certainly been a couple of anxious and stressful weeks with long discussions about what to expect, as well as his future and what that may be. As one might imagine, all kinds of parental memories of him flood back, and they are bitter sweet, but we are encouraged by his desire to excel and his choice to join.
With it being summer, you might notice a more casual and laid-back attire than normal-not quite the t-shirt and flip flops, but just a heads up.
The month of May was anything but dull. I think we saw the markets react quite negatively to the Trade War between China and US in addition to Mexican Tariffs being used as a deterrent by President Trump to stem the tide of illegal immigration. A 6.6% decline in the S&P 500 would fall in line with a "normal" correction but certainly did not carry the feel or flavor of normal.1
With Mexico quick to avoid the entanglement with the US (with what's happening with China, who can blame them), we are back to 2 central themes that are acting like a love-hate attitude with wall street being the weighing machine: the trade War with China and the on-going belief that it will get resolved with the unknown of how long it will take weighing on everyone's mind and the FED's ongoing dialogue around interest rates.2,3
The beginning of June was met with gratitude on wall street at the thought-or shall I say, rumor-that the FED could possibly reduce interest rates rather than raise them.4 In my opinion, reducing them would not really be conducive to a solid monetary policy, since we are not yet facing any real prospect of a recession or slowing GDP or any other number of items that could suggest such a response. On the other hand, though, the opinion seems to be that we are not facing any headwinds that might suggest a raise in the rates either, but time will tell, I guess.
We saw for an 8-day period, Stormguard adjust from a bullish reading to a bearish reading, resulting in some minor adjustments in some of our more conservative client portfolios. We also have witnessed a pretty big change in Dorsey's pecking order of asset classes as well. Domestic and Foreign equities are still out front, but now Fixed Income has taken third place over commodities, cash, and currencies at present.
This shift seems corroborated with other material that I have read as of late, warning of this market condition being short-lived.5 Whenever I read and research data, one piece is never enough to act upon; however, when you see several credible sources all speaking and warning in a similar fashion, it does peak your interest to prepare, which is what we are doing. It may be next month, next quarter, or next year or longer, but when the tides change, we will certainly see who is swimming without their suit on, to quote Warren Buffet.
Till we speak again, enjoy the days without rain!
Big Gains for the Major Indices
WEEKLY UPDATE - JUNE 10, 2019
The Week on Wall Street
Stocks rallied during a week in which Wall Street was buffeted by headlines. The S&P 500 rose 4.41%. The Nasdaq Composite and Dow Jones Industrial Average respectively added 3.88% and 4.71%. The MSCI EAFE index of overseas stocks improved 2.02% across five days.
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