Market Alert August 5th, 2018: Playing With Fire
As Retirement Planning Specialists, 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.
- Will This Trade Dispute with China Devolve into War?
- We Believe That the Risk That We Have Today Is Different From Anything We Have Had in History.
- We Continue to Stand By Our Fearless Forecast of Dow 26,500 by the End of 2018.
Will This Trade Dispute with China Devolve into War?
The Chinese responded to the tariffs put on them by President Trump with their own set of tariffs as tit for tat continued last week. The interesting difference was that the Chinese said that they had to do so “for national pride and to protect their interests.”
The concerning word was “pride,” which is an emotional word and one that can cause people to do things that they may not do otherwise. We interpret this as having to “save face” and avoid backing down to the U.S. in front of the countries under its influence.
Because of this, we believe that a trade war will break out so that the Chinese can say that they went all the way without giving in. We also believe that a truce will be called soon after that, as both sides do not want to have a trade war. A truce will allow both sides to say that they did not give in to the other.
Unfortunately, a breakout of a trade war would most likely cause the S&P 500 Index to go into a bear market. The potential repercussion of a full-on trade war between the U.S. and China is very scary.
Most likely both countries would go into recession, ours not as deep as theirs, but still a notable slow down in economic activity. If the two largest and most influential economies in the world are in a recession, the rest of the world could be drawn into something worse.
We say this because of the level of government debt worldwide. Many countries are barely hanging on in our current healthy economic environment; we believe that many will fall into a severe recession.
We Believe That the Risk That We Have Today Is Different From Anything We Have Had in History.
The hundreds of trillions of dollars of global debt put a significant strain on government’s ability to do anything about the next recession. In fact, we see all this debt exacerbating the effects of any economic slowdown. The worst recessions that we have had around the world have mainly been the result of governments taking on too much debt.
Look at the Chart Below:
- Do you have a plan for what to do when the next market crash comes?
- 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 properly diversified?
We would love to review your entire financial plan, analyze what you have and see if we can help you. If we can, that’s terrific. If not, that’s fine too. Either way, there is no charge or obligation, and we will part friends!
We Continue to Stand By Our Fearless Forecast of Dow 26,500 by the End of 2018.
While we reached our fearless forecast of Dow 26,500 for this year in January and retrenched from there, we believe that we will rise to that level again before year end.
We are thankful that we have a sell strategy. Without it, we would find it very difficult to justify investing in the stock market at this time. A trade war poses a significant threat to the markets, and we worry about those that do not have a defensive strategy in place.
Our strategy enables us to participate in the upside as long as it lasts, and it is designed to get us out with tolerable losses when the trend changes.
Do not get complacent. Overconfidence is dangerous when it comes to investing.
While this year will most likely not be as good as last year, it is shaping up to be a good year. We will never become complacent, however. We must never let our guard down and never take the market for granted. It is when overconfidence sets in that the market is the most vulnerable.
With the market near all-time highs, this is no time to be complacent and assume that the market only goes up! The best time to plan ahead for the next market crisis is now!
As you can see in the chart below, the market can turn around very quickly and very unexpectedly. The 2008 bear market wiped out 12 years of gains in just 17 months. Many of you participated in that bear and the one in Y2K.
Clients who followed our lead were out of the Stock market during the great market crash of 2008.
Source: Standard & Poor’s
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 from the next market crash?
- How do I avoid the 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?
- How much can I afford to spend during my retirement?
- What is the best investment I can use to 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 taxed?
- Should I rollover my 401(k)?
- How do I reduce my income taxes in the future?
- Trade War Could Break Out Before It Is Over
- What To Think About When Buying Long-Term Care Insurance
- Social Security Benefit Increases
- How Would A 25% to 50% Loss That Takes 7 Years To Recover Affect Your Retirement?
- Estate Tip: The Family Limited Partnership
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! I believe that avoiding large losses is the single most important thing that we should be concerned about as investors.
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 achieve your financial goals.
Thank you for subscribing to this newsletter. I hope it finds you and yours in good health and spirits.
Ken Moraif, CFP®, MBA