Stocks Sell Off 3%; Time to Have Your Plan in Place

It was a particularly nasty day Wednesday for the U.S. stock market. The selling started off from the get go at 9:30 a.m. on the opening, and continued into the close at 4:00 PM.

The reasons that could be used for the selling today include the recent march higher in interest rates, the uncertainty of the quarterly earnings reports to begin flooding out next week, the effect of the trade tariffs with China – to name a few. At the end of the day, sellers outnumbered buyers 9 to 1.

The popular Dow Jones Industrials fell around 830 point or 3%, the S&P 500 fell 3.3%, while the Nasdaq Composite shed 4%. Ninety percent of the trading volume was down trades. The Dow Jones stood at the 800 level when I started in this business, many moons ago !

The best performing sector, Utilities fell about ½ percent today, and very short term bond funds were break-even to up about 1/5^th percent. All 11 S&P sectors fell some to degree Wednesday. Gold rose $4 an ounce to $1,194 the ounce, so it did not provide much of a cushion; at least not yet.

We’ve enjoyed some nice gains the past few months in Technology and the Health Care sectors. They are ahead year-to-date 13% and 11% respectively after today’s sell-off. Just four sectors are losers this year thus far: Financials, Real Estate, Consumer Staples and Materials.

Before panic sets in, consider where we have come this year, on top of the nice gains of 2017 – up 25% - the Dow is back to where it stood in mid-August, while the S&P 500 is equal to its mid-July level. Generally the last two months of 4-6 % gains in these two indices has been erased thus far in October. For a long term investor, that should not be a concern…BUT, you have to assess what you own and how tough a stomach you have to hold stocks with losses – or perhaps gains that are eroding. For that, you need to do some math. Grab that calculator, or slide-rule. 

We suggest, as we’ve stated here regularly, to use a stop price at which you will sell. Your broker or advisor should be talking this up as part of your portfolio strategy. 

For instance, if you bought a stock or mutual fund for $100, you would sell it at $92 for an 8% loss if you used an 8% stop price. If you have further questions on this, e-mail me for a look-see on how to set this up. I offer free consultations.

Interestingly, on a historical basis, the last stock market bear market – the 2007 – 2009 financial crises, started in early October 2007; the 9^th of October to be exact. The Dow stood at 14,164 that day, and fell to 6,547 by March 2009, a 53% loss. It would take another 4 years, to March 2013, for the Dow to break above the 2007 high. That’s a lot of time to fret and second guess things.

So I recommend to have a plan, enact it, and then follow it. Take your emotions out of the equation.

Thanks for reading friends.

Labor Day's Origin; Market Update

As we head into the Labor Day weekend, I wish all of you - clients and friends - a safe and enjoyable time off with your family and loved ones.

Labor Day History

Labor Day honors the American Labor Movement and the contributions that workers have made to the strength, prosperity, laws and well-being of the country. 

Trade Unionists first set forth the idea in the late 19th century. The Central Labor Union organized the first parade in New York City in 1882. Oregon was the first state to make Labor Day an official public holiday 5 years later. By 1894, it was proclaimed as a Federal Holiday.

The selection of the date to celebrate the first Monday is September was thought to be contrived to be equi-distant between the July 4th and Thanksgiving holiday, as it nearly is so today.

Today, we think of Labor Day as the un-official end of summer, when vacations end, schools start back, and the seasons weather turns toward Autumn. Sports fans are ready for football games and baseball playoffs. 

Obviously, designating the day as a Monday holiday greatly helps those who work and wish to get away for a 3-4 day vacation. An estimated 30 million American’s will travel this Labor Day weekend, Friday being the busiest day.

In the financial markets, this summer is anything but boring. Many industries and companies are reporting excellent profits, and their stock prices are moving higher. Stocks are ahead 6% to 9% (Dow and S&P 500), while Gold and Bond prices are mixed with the higher interest rates affecting their attractiveness. Gold’s lost about $100 an ounce this year.

Employment is very robust, and unemployment falling rapidly this year to under 4%. This ‘bull market’ with rising asset prices is now the longest on record, commencing March, 2009. 

These times are getting a bit ‘giddy’ in my opinion. One example: the U.S. has legalized recreational use of marijuana in 5 states now: Alaska, Colorado, Oregon, and Washington state. Add Washington D.C. to that list also. Hmmm, maybe that’s why our politician’s are acting foggy and confused? 

Canada will legalize recreational POT in mid-October. Could this all add up to the great fall of Western civilization as we know it? Time will tell, readers.

My question on all of this (mostly) good news is: what will be the catalyst to cause the BULL to stop running? And what will that look like for investor’s portfolios? Rising interest rates along with inflation? Geopolitical events, the trade situation escalating.

The last bear market - in case you missed it - saw prices fall in half from 2007 to 2009; 17 months to be more exact. An equal fall today would take the Dow Jones Industrials Average down from 26,000 to 13,000. I think that’s not likely; but plausible. One last point for long-term investors. If you are disciplined and long term thinking, you can almost always recover from bear markets in decent shape - if you have the time and don't get too antsy.

To wit: If you bought all your stocks at the market high in October, 2007 - Dow 14,000 - and held them until today; you would have gained 7% on average each year.

Sure, that may not make you the hit of the party vs. your friends who own Apple or Amazon shares (or that 'hot' marijuana farm stock), but you can sleep at night by being conservative and diversifying your money across stocks and bonds, and some cash. And that's not a pipe dream.*  

Do have a happy and safe holiday.     

~Barry Unterbrink, C.R.P.C.

* an unattainable or fanciful hope of scheme.
 

     

May's Markets Review - Two New Programs to Consider

May’s financial performance in the markets was good to great, overall.

Stocks rose 1.5% to 5% depending on the index measured. Big stocks rose the least; the Dow and S&P 500 tallied +1.4% to +2.5%, while the Nasdaq Composite ran ahead over 5%. The chief reason: Big technology names such as Facebook, Netflix, and Apple all shot ahead between 11%-14% in May, thus supercharging the NASDAQ index.

Bonds did well too, as interest rates fell back from their highs (falling rates means higher bond prices).

5 year Treasury Notes ended May with a 2.66% yield, while the 10 year was 2.82% and the long 30-year Bond paid 2.99%. For uninvested cash, we recommend a couple short/intermediate term bond ETF’s that earn 3% to near 4% interest.
Our favored commodity, Gold pulled back about 1-1/2 percent, as the yellow metal declined $14 to $1,297 per ounce. Gold is even for this year thus far.

If you’ve been a reader here for a while, you will know that I do not recommend individual stocks. We use groups of stocks, called Exchange-Traded Funds (ETF’s) which cover a broad sector of the U.S. stock market.
Technology, Financials, Energy – are examples of these ETF’s. There are 10 in total. We rotate these sectors according to their performance each month. Technology and Energy are owned for June. We feel this is a safer way to manage money, as there is less single-issue risk. Why not use mutual funds, you may ask? Good point, but mutual funds are very actively managed – and that comes at a price – in trading costs and operating expenses that are deducted from your fund values. Mutual Fund fees may average near 1%-1.2% per year, vs. the ETF fees of 1/5% to ½% per year. ETF’s are the new mutual fund for many cost conscious investor now-a-days.
We recommend that you continue to have a diversified portfolio of stocks, bonds, and some Gold. And, consider some safe (no loss) savings instruments also such as fixed annuities and CD’s. Rates are rising here too; a plus for older savings-oriented folks.

2 New Strategies Offered this Summer

I have been researching and kicking the tires - with some professional financial firms during the past few months - that offer exceptional strategies that may greatly interest you and your money. Next month, I will get an invitation out to you on more details and how you can participate via my on-line webinar on this.

The first program is a system to pay down your debts much faster that you are now, using the same spending you are using now. Credit card, student loans, mortgage, etc. Paying down debt quicker frees up cash flow for more options with your money – agreed? And gets you on the road to asset accumulation / savings much faster too.

The second program is very unique – and involves using your qualified retirement money, IRA’s, 401k, etc. and – with the I.R.S. blessing – restructuring your money so that it falls outside the normal distribution and investment limitation rules of your current plan. It’s a bit complex, and requires qualifications from you the investor. Stay tuned for more information, or e-mail me and I will make sure you get advance notice.

Have a nice and safe weekend!
~Barry Unterbrink
 954.719.1151 w
 954.560.3622 m
 Unterbrink@usa.net