April 16th, 2017 - Despite the speculation that we could be going to war with the Russians and the Chinese, the markets chose to focus on economic fundamentals last. We saw the stock market fall and the bond market rise.
Consumer confidence, which drives 70% of our economy, rose to the highest level since November 2000. The current conditions gauge, which measures consumers view of their personal finances, also increased to the highest level since 2000.
This is perhaps not the best indicator of the stock market’s direction, as we all remember what happened in 2000 with the stock market going down almost 50%.
The consumer seems to be on a roll as the job market continues to be strong and optimism still remains regarding the growth policies that the Trump administration is promising to put in place.
82% of the respondents of the Michigan consumer confidence survey said that they might be making big purchases soon. This is the largest percentage since 2005.
Since the consumer is the largest driver of our economy, this is all very good news and bodes well for corporate profits and therefore for the stock market.
Interestingly, 69% of Republicans felt very confident compared with only 28% among Democrats.
What pulled the market down last week was that retail sales dropped for a second month in a row according to the US government. For now, the stock market does not seem to be overly concerned about this apparent contradiction between consumer confidence and spending.
Inflation fell in March, surprising almost every economist. The Labor Department said that the consumer price index fell more than it has any time since 1982.
The combination of slower retail sales and inflation being lower than expected combined to give the bond market hope that the Federal Reserve may not raise interest rates in June.
We continue to believe that the Trump administration will make progress on the tax reduction and deregulation fronts. With increased consumer confidence and the possibility that the Federal Reserve will not raise interest rates as rapidly as was believed, we continue to see fertile ground for our fearless forecast of Dow 23,000 coming to fruition later this year.
Of course, no one has a crystal ball, and anything can happen any time as we have seen many times in the past. It is why we must be ever vigilant and not take for granted that the market can only go up. This is why we have our sell strategy in place ready to signal when it is time to sell.
To invest without having a strategy to protect your money is very unwise particularly right now. The market is at all-time highs, and we all know that trees do not grow to the sky. We urge you not to become complacent or to take for granted that the market will only go up. Recessions and bear markets have come when everything was going well.
We saw this just before the bear market of Y2K and the market lost 50% of its value and we saw the same thing 2007 just before the market lost 57% of its value.
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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 Drums Of War!
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- Should You Have Long Term Care Insurance?
- Know When To Hold 'Em; Know When To Fold 'Em
- Estate Tip: Don't Leave Anything To Your Spouse!
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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