March 19th, 2017 - The market notched another up week despite the Federal Reserve raising interest rates, as economic data from payrolls to inflation met or exceeded estimates.
The market had its biggest day on Wednesday after the Federal Reserve raised interest rates a quarter of a point and continued to reiterate its forecast of two more increases this year. As we have described to you in previous emails, the Fed raising interest rates is a sign of their confidence in the economy and, therefore, a good sign for the stock market going forward.
While the Federal Reserve seems to be positive in its outlook, we must not forget that Ben Bernanke, the then chairman of the Federal Reserve, in October 2007 told us that all was well and that subprime was a very small part of the mortgage market and we had nothing to worry about. We obviously did not agree with this assessment as we counseled our clients to sell in November 2007. We do agree with the Federal Reserve this time around, but we must never take anything for granted nor must we ever become complacent.
We are now in the second longest and third strongest bull market of all time. If we see another 4% rise from here, this bull market moves into second place in terms of strength.
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Are you missing out on this bull market because you are afraid to invest?
There is still a record amount of money sitting in cash which tells us that there is still room for the market to rise from here. We believe that investors are afraid right now because the market is at all-time highs. We do not feel that fear because we trust our sell strategy to help us to get out before any major damage is done.
The other dynamic that we forecasted might happen is that bonds could rise even if the Federal Reserve were to raise interest rates. Last week at least, that is exactly what happened. We saw both the stock market and the bond market react favorably to the actions by the Federal Reserve.
Attention now turns to the politics of Europe. From the rise of far-right French presidential candidate Marine Le Pen to Britain’s likely triggering of Brexit from the European Union this month, there are plenty of potential flashpoints.
The defeat in this week’s Dutch elections of anti-immigration candidate Geert Wilders is already being seen as a blow to the spread of political populism. We believe that the tide is turning in Europe and that the establishment candidates will probably win. Should this happen, most likely the markets will like it, and we will not see too much commotion caused by these elections.
So, we stay the course for now. We still see our Fearless Forecast of Dow 23,000, and we expect bonds to do reasonably well this year as well.
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. I am sure that you do not want to do that again.
Clients who followed our lead were out of the stock market during the great market crash of 2008.
We do not want to see crippling losses happen to anybody. It is why I write this email; it is why our advisory firm exists, it is why I do my radio show and why we have our seminars. I want to help as many people as possible not to become poor and to have peace of mind.
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 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?
- How do I protect my retirement from the next market crash?
- Am I diversified properly?
- How much can I afford to spend during my retirement?
- What is the best investment I can use to fight inflation with?
- How do I determine how much risk is appropriate for me?
- Do I take my pension or a lump sum?
- How do I avoid having 85% of my social security being taxed?
- Should I rollover my 401(k)?
- How do I reduce my income taxes in the future?
Our goal is to provide peace of mind to our clients. If our clients can feel peace of mind during times of great market adversity like we have had over the last few years, then we believe we have delivered our product.
- The Road To Dow 23,000
- What Will Your Cost Of Living Do As You Get Older?
- Social Security Tax: Provisional Income
- Buy-Hold Myth #4: Diversify Your Portfolio... That's All You Need To Do
- Estate Tip: Love Units
There is nothing more important to us than that. 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 of the resources that we at Money Matters have to offer you.
We want to help you to 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
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