Message from Jon
As I take a deep and prolonged inhale and then a sigh, I thought it would be good to shoot out an update as to what is happening and what the data is saying and our thoughts overall.
In our opinion, we are witnessing an increase in the intensity of market volatility and swings as a result of a news cycle that has been relentless. We are seeing the Trump v China trade war rhetoric continue to drag out and as of this am, China retaliating with an increase of 10% on $75B worth of US goods.3 We are hearing where there is a concern about Germany's economy slowing to a point where a recession is now within sight, assuming everything stays as is and no governmental intervention.4
We have now been informed that the 2 year treasury bill has more yield than the 10 year treasury note creating what is known as an inverted yield curve for the 3rd time and a federal reserve who is facing it's first decent in opinion since the newly appointed Chairman Powell has taken the helm.6,7
The sigh comes from the fact that any good news seems to fade quickly into the background at present which leads to this massive wave of pessimism and "bearish" tone washing through news outlets and local conversations.
Does this come as a surprise? Not exactly, however, it doesn't make it pleasant just because you are not surprised by what's taking place. It just allows you to not over-react with everyone else.
Back in December, we posted some information about a bear market condition setting in and even posted an article that was good at describing the anatomy of a bear market. The criteria, the historical numbers and longevity that may be a good point of reference here as a refresher to the relevance of what is happening today. See newsletter dated 12/17/2018.
This does not automatically translate to a move to higher ground now just because we are seemingly and the key word here is seemingly seeing what we thought we would see earlier this year. For one, we did not see the FED cutting rates which historically indicates that the markets show a positive return post mid-cycle adjustment.1,5 We thought (or hoped) that the Trade war would have been close to or completely resolved by now but it appears to be no closer today than earlier this spring.
We are thankful to our technical analysis for doing a great deal to help us navigate through all the noise at present in the newscycles. In my opinion, if you did not have this approach, trying to navigate the volatility and velocity of changes unfolding would be nearly impossible leaving one to simply be all out of the market due to the intensity and fear of one's emotions OR to simply buy and hold and turn a blind eye and deaf ear to all of it and throw up one's hands in capitulation!
Are we seeing the indications we follow weaken, of course. Are they still bullish in their trend and signals at this point? YEP.
Do we watch them daily to make sure that we are quick to make changes as the changes are necessary? Yes we do.
When do we think that will be and what will be the cause? Since our crystal ball has long since cracked and in the closet, we do what we can do which is stay diligent, remain patient and in the moment as it were and on the look-out for opportunity to profit from or protect from disconnects in the markets that would serve our clients best interests which are defined by their individual needs, wants and wishes.
"OMG reaction vs That's it" reality is striking at times! 2
If you have $100,000 invested and experience a 20% decline, what is the actual income impact to your situation in retirement?
- $100,000 *80% = $80,000.
- Income from $100,000 at a 4% distribution = $4,000 per year or $333.33 per month
- Income from $80,000 at 4% distribution = $3,200 per year or $266.66 per month.
A loss of $66.66 per month. While this is a loss, it is likely a temporary one at best since the markets don't go straight down to stay just like they fail to go straight up and stay. At a point in time, this condition too will pass if only the investor can resist the urge to react emotionally. That is not to say you should avoid acting at all, it just means that emotion is often more than reality. Be patient, remain calm and carry on with your needs, wants and wishes as a focus and not the seemingly daily/weekly or monthly movements of your investments.
Till we speak again, stay focused and productive!
China Announces More Tariffs
WEEKLY UPDATE - AUGUST 26, 2019
The Week on Wall Street Traders assumed that the week's biggest news event would be Federal Reserve Chairman Jerome Powell's speech at the annual Jackson Hole banking conference. Instead, China seized the headlines by announcing new tariffs on U.S. goods.
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