Market Alert December 23rd, 2018: Investors, You Have Been Warned!
As a firm that specializes in Retirement Planning, our two goals for you are:
- For you to have Financial Peace of Mind and
- For Your Money to Last As Long As You Do
Our investment philosophy of Buy, Hold, and SELL! is designed to give us Unlimited Upside with a Tolerable Downside.
- The Dow Jones Industrials Fell by Almost 1,400 Points after Our Sell, Which Is about 5%, in Four Days.
- Expect Next Week to Be an Up Week in the Dow and the S&P 500 Index, but Don’t Be Fooled.
- Issues Still Facing Worried Equity Investors Are China Tariffs, Government Shutdown, Higher Interest Rates, Declining Real Estate Market, Etc., Etc.
- If This Turns Out to Be a Bear Market and We Don’t Have a Recession, Expect This Bear Market to Last Seven Months, According to Ned Davis Research.
All we can say is that we are so glad we had our Buy, Hold, & SELL! Strategy in place. We are thankful that we have a sell strategy. Without it, we would be having sleepless nights AND losing money.
Our strategy enabled us to participate in the upside as long as it lasted and it is also got us out of equities with tolerable losses when the trend changed.
And boy did it!
If you are not a client of Money Matters, we want to visit with you! Let us worry about all this so that you don’t have to.
Over 50? Schedule a free retirement consultation with one of our financial advisors. We believe you will find them to be friendly, knowledgeable, and capable, and we will help you to make the important financial decisions needed to create your personalized retirement plan.
- What are you doing to respond to the market decline?
- Do you know if you have enough money to retire?
- What are 5 strategies that you can use to reduce your income taxes?
- How do you plan for your retirement cash flow?
- What should you do to maximize your Social Security benefits?
- Are you diversified the way you should be?
We would love to review your retirement plan with you and see if we can help you. If we can help you, that’s terrific, if not that’s fine too. Either way, there is no charge or obligation, and we will part friends!
The Dow Jones Industrials Fell by Almost 1,400 points after Our Sell, Which Is about 5%, in Four Days.
This is shaping up to be one of the worst Decembers in many years for the equity markets. The financial and political news seems to be nothing but bad.
Expect Next Week to Be an Up Week in the Dow and the S&P 500 Index, but Don’t Be Fooled.
Given the amount of selling that we saw last week, we would expect there to be some investors who feel that there are bargains to be found. This could result in an up week for the stock markets. We feel that people who engage in this behavior will be exhibiting the classic “catching falling knives,” which usually doesn’t end well.
I would like to invite you to come to one of our seminars. They are designed for those of you who are retired or retiring soon, and they are free.
At the free retirement seminar we will answer these burning questions:
- How do I protect my retirement savings?
- How do I avoid three basic “pitfalls” of retirement distribution planning?
- Am I on track to be able to retire?
- When should I take Social Security? 62? 66? 70?
- Am I diversified the way I should be?
- How much can I afford to spend during my retirement?
- How can I fight inflation?
- How do I determine how much risk is appropriate for me?
- Do I take my pension or a lump?
- How do I avoid having 85% of my social security getting taxed?
- Should I rollover my 401(k)?
- How do I reduce my income taxes in the future?
Issues Still Facing Worried Equity Investor Are China Tariffs, Government Shutdown, Higher Interest Rates, Declining Real Estate Market, Etc., Etc.
The headline-making issues are the China tariff negotiations and the government shutdown. While both of these issues are certainly very important, and if not resolved positively, could result in damage to our economy, and therefore, to our stock markets, we believe both of these concerns will be resolved within the next month.
The one that causes us the most concern is the Federal Reserve raising interest rates in a period where the global economy is slowing down rapidly because of rising interest rates. In our view, they are focusing too much on the domestic economy and not considering that as we raise interest rates, the dollar strengthens, and the global debt denominated in dollars becomes more expensive to pay back and more expensive to service.
We believe that this is the greatest risk that the global economy faces because many countries are very deeply in debt and just one sovereign default could start a domino effect like what we saw in 2008.
Peter Schiff, the chief executive of Euro Pacific Capital, said it as well as we could: “This isn’t a bear market,” he says. “We’re in a house of cards that the Fed built.”
With almost a decade of free money, the Federal Reserve has rewarded the use of debt, and consequently, global debt has exploded to levels never seen in the history of humankind. Below is the latest chart from the Institute of International Finance (IIF) from 2016. We know that the global debt has increased dramatically in the last two years, making the problem even worse.
If This Turns Out to Be a Bear Market and We Don’t Have a Recession, expect This Bear Market to Last Seven Months, According to Ned Davis Research.
Despite everything, the U.S. economy still appears to be strong, and it is possible that we could have a bear market while not having a recession. Should this be the case, the average non-recessionary bear market in the S&P 500 index lasts about seven months, according to Ned Davis research.
A listener to our radio show asked, “If the bear market only last seven months, then why worry?” Our response to that is a tornado only lasts about 15 minutes. It is not the duration of the storm that is worrisome, it is how much damage is done and how long it takes to recover from it.
Y2K for example, was a non-recessionary bear market as there were not two consecutive quarters of negative growth, but the S&P 500 Index fell 57%, and there was almost a seven-year gap between the peak in 2000 and the new peak in 2007.
Clients who followed our lead were out of the Stock market during the great market crash of 2008.
Source: Standard & Poor’s
We believe that the risk that we have today is different than anything we have had in history.
The hundreds of trillions of dollars of global debt is putting a significant strain on government’s ability to do anything about a recession. In fact, we see all of this debt exacerbating the effects of an economic slowdown. The worst recessions that we have had around the world have mostly been the results of governments taking on too much debt.
- Are We In A Bear & Don’t Know It?
- 18 Risks Faced In Retirement #14: Employer Insolvency Risk
- Questions About Social Security
- Buy-Hold Myth #3: Don’t Be The Fool Who Sells @ The Bottom
- Estate Tip: A Trust For Your Home
It is our singular goal to keep our clients from becoming poor. Preserving the wealth that they have built is job number one for us. I encourage you to join the Money Matters family!
Perhaps you were given a package by your employer. Perhaps you sold an asset and want to know how to properly invest the proceeds. Perhaps you inherited money and want to keep it safe and grow it if you can. Perhaps you just want a second opinion. These are all reasons for you to take advantage of all the resources that we at Money Matters have to offer you.
We want to help you to achieve your retirement goals.
Thank you for subscribing to this newsletter. I hope it finds you and yours in good health and spirits.
Ken Moraif, CFP®, MBA