When have we seen this volatility before?”

When have we seen this volatility before?

The market has seen a prolonged period of volatility over the last several weeks, with more down days than up since September, and a significant decline since November 5th, the last major high we saw on the Dow at 25,989. When have we seen this type of volatility before?

Many market analysts have been reporting this is a likely a correction, a bear market warning signal, or signs of another 2008-style collapse.

To answer that question, the data paints an interesting picture:

I. Top 3 reasons the market volatility is not a cause for concern:

  1. “VIX is operating in a narrow range”: The volatility index, known as the VIX, shows how volatile stocks are trading. At the time of writing this blog, the VIX was around 21 … the historic average is 20.  Not exactly tremors of a market melt-down.  Surging VIX data sometimes represents buying opportunities or the market searching for a trend line.  In either case, it is not necessarily a call for a bear market.  In the summer of 2008, the VIX was averaging a 19 and we were already in a recession.  In 2000, the VIX was averaging a 22 before the broad market declines of the dot.com bubble burst.
  2. “Credit market stress having a greater impact”: Credit market stress and the pricing of debt due to recent rate hikes by the Fed have influenced stocks more than volatile trading. We have never had a policy environment of zero interest rates for 8 years, and then raising them from zero in such a short period of time.  There is no historical record to compare it to.  Congress changing hands has also had an impact. Congress cannot implement new policy, but they sure can hinder implementation of existing policy.  Markets are reading this information – volatility is not the issue – a downward turn in the markets due to increased borrowing costs is one of many.
  3. “Retail sales setting records”:  Cyber Monday was the biggest sales day in US history, topping $7.9 billion … this was on top of the $6.2 billion in sales on Black Friday.  The combined weekend numbers were 20% higher than 2017 and support an ongoing narrative on Wall Street – the US consumer is driving, sales, profits, and in turn – markets.  The 3.5% third quarter GDP number should be higher by the time 2018 wraps up.

II. Top 3 reasons the market volatility IS a cause for concern:

  1. “Stock market ‘down days’ have not been this bad since the ‘08/’09 crisis”: Stocks have moved 1% or more 50 days this calendar year – significant volatility not seen since the 2008-09 financial crisis. Five of the top ten all-time single day record losses have occurred this year in 2018, including the top three all-time daily losses ever, and two of the top 20 occurring this past month of November.  This data suggests volatility is an understatement.
  2. “Volatility worse than 2015 Chinese yuan devaluation”: In August of 2016, the VIX spiked to 40.75 and remained in the 23-25 range in the fall and winter. The Chinese began devaluing their currency without public notice and traders were caught off guard.  Doom and gloom were all the rage … markets took six months to find their bottom … and then, as we know, the market proceeded to continue its historic rise.  And that is the whole point – 2008, 2010 flash crash, Chinese devaluation … we have seen volatility before that has not pushed us into a bear market, we are obviously due for that correction.
  3. “2018 most volatile year for markets since … 2009”: When have we seen markets this volatile before???  Exactly, 2009, the second calendar year of the financial crisis.  As stated above, the VIX before the crisis was moving within its traditional range, so not a predictor of trouble ahead per se.  But once the crisis had hit and was in full force and effect, the VIX shot above 80 and remained in a range of 50 for much of 2009.  According to MarketWatch, compiling data since 1980, 2018 was the third most volatile over the last 38 years.

Data can be used to make an argument one way or another.  There is only one way to not have to worry about market shifts – and that is through having your money in principal protected products in the first place. If you want to have your money protected against market losses and growing at the same time, give us a call. (877) 912-1919

Giving Thanks This Season - Thanksgiving 2018

Giving Thanks This Holiday Season

Thanksgiving 2018 is upon us, and there can be no better way to reflect upon the blessings we Americans enjoy than recalling some of the great messages from leaders in our past.

As we celebrate Thanksgiving this season, let’s remember the moving words of former great statesmen, and the greatness of America for which they embodied:

Ronald Reagan’s Thanksgiving Day address, 1982:

“…I have always believed that this anointed land was set apart in an uncommon way, that a divine plan placed this great continent here between the oceans to be found by people from every corner of the Earth who had a special love of faith and freedom.”

 Two hundred years ago, the Congress of the United States issued a Thanksgiving Proclamation stating that it was “the indispensable duty of all nations” to offer both praise and supplication to God. Above all other nations of the world, America has been especially blessed and should give special thanks. We have bountiful harvests, abundant freedoms, and a strong, compassionate people.

 I have always believed that this anointed land was set apart in an uncommon way, that a divine plan placed this great continent here between the oceans to be found by people from every corner of the Earth who had a special love of faith and freedom. Our pioneers asked that He would work His will in our daily lives so America would be a land of morality, fairness, and freedom…”

  Franklin Delano Roosevelt’s Thanksgiving Proclamation, 1933:

“…May we on that day in our churches and in our homes give humble thanks for the blessings bestowed upon us during the year past by Almighty God.

 May we recall the courage of those who settled a wilderness, the vision of those who founded the Nation, the steadfastness of those who in every succeeding generation have fought to keep pure the ideal of equality of opportunity and hold clear the goal of mutual help in time of prosperity as in time of adversity.

 May we be grateful for the passing of dark days; for the new spirit of dependence one on another; for the closer unity of all parts of our wide land; for the greater friendship between employers and those who toil; for a clearer knowledge by all nations that we seek no conquests and ask only honorable engagements by all people to respect the lands and rights of their neighbors; for the brighter day to which we can win through by seeking the help of God in a more unselfish striving for the bettering of mankind.”

 There is a lot to be thankful for this season.  Even those going through life’s difficult struggles remain blessed – for they were born in the United States of America.  Our firm wishes you and your family a wonderful Thanksgiving this year!!!

 

Election is Over: Who Were the Winners and Losers?

Election is Over: Who Were the Winners and Losers?

Thanks to social media and 24-hour cable news, it feels like modern America lives in a perpetual news cycle … and a perpetual election cycle.

The most recent of the never-ending campaigns – the 2018 midterms – has concluded, and most of what was expected did not occur.  There was no blue wave, the Republicans did not lose the Senate, and there were zero upsets that would leave you scratching your head.

While several House districts remain to have a final vote tally, it is safe to report as of this writing that the Democrats have taken control of the House of Representatives for the first time since 2010.  Their vote margin will range anywhere between 26 and 40 seats when the final vote counts are reported.

Some contests remain undecided and carry significant political interest, but do not change the balance of power in Congress.  That includes the Georgia governor’s race.  Stacey Abrams has refused to concede, although 100% of the precincts have reported their vote totals as of Wednesday afternoon and she trails by more than 1%.   Counties in Georgia have until November 13th to certify their vote totals, and expect this to be a protracted battle for the next several days or weeks.

With the 2018 election now in the rear-view mirror, at least most of it, we can look back at the winners and losers from this past Tuesday and what it means for you:

I. Who are the top three election night losers?

  1. “Moderate Republicans take it on the chin”: More than 40 House Republican incumbents decided to retire rather than run for re-election … the highest numbers since the Civil War.  Senators Jeff Flake and Bob Corker, both Trump critics, decided to step down.  Moderate House Republicans Carlos Curbelo and Leonard Lance both tried to distance themselves from Trump – and got defeated rather easily.  The mid-terms are about turnout, and you never win a race in a mid-term running from your base.
  2. “Progressive Democrats”: Beto O’Rourke, Richard Cordray  … there are others, but every media darling who received an Obama visit and hundreds of millions of dollars from left-wing PACs and left-wing donors such as Tom Steyer – lost.  And don’t forget Democrats who voted against Senate nominee Brett Kavanaugh – all took it on the chin in red states with the exception of Joe Manchin, who voted for Kavanaugh.  There are still many progressives left in the Congress, and some even won Tuesday night, such as Alexandria Ocasio-Cortez and many candidates in California.  There is no doubt that progressive money, progressive Hollywood, and the Obama machine are ascendant in the Democratic Party … they’re just not that good at winning votes from a majority of Americans, at least not yet.
  3. “President Trump”: This should be obvious, but the President’s party lost control of the House and his Congressional opponents will be ready on day one to launch investigation after investigation into his administration … including but not limited to impeachment proceedings.  No longer protected by his Party in the House, this will make daily governance a significant challenge for President Trump.

II. Who are the top three election night winners?

  1. “Conservative lawmakers”: As strange as it may seem, red state lawmakers survived and in fact the Republicans won several Senate seats to expand their majority.  The Democrats won House seats in the Midwest primarily as they did in 2006 – by selecting pro-life and pro-gun moderate-to-conservative candidates.  Except in California and other blue pockets here and there, conservative candidates were the big winners from Tuesday night.
  2. “President Trump”: That’s correct.  While the House will be pushing an investigatory, impeachment agenda, Trump’s losses are negligible compared to previous President’s … and none have contended with the media hostility he has engendered.  Clinton lost 54 House seats in his first mid-term, and 9 Senate seats.  Obama lost the all-time record of 63 House seats, and 6 Senate seats.  Trump will have lost in the mid-30s when the votes are all counted, and actually picked up three Senate seats.  All-in-all, it could have been MUCH worse.
  3. “The stock market and the economy”: Yes, things can change overnight, but markets like predictability, and gridlock is predictable.  Lots of variables such as Fed Rate Hikes and trade conflicts with China, but in general, the stock market and the main street economy were winners with the election results from Tuesday night.  There should be zero changes to the current low tax, deregulation policies at least for the next two years.

 The election seems to highlight the polarization found on social media, and not the day-to-day blessings of living in America.  There are always winners and losers in politics, but there should only be winning in your financial planning for the future.  Call now to have one of our advisors discuss the safe, simple and reasonable rate of return options for your portfolio! (877) 912-1919