Quarterly Reports

  • THIRD QUARTER REPORT 2017

    Michael D. Kresh CFP®  RF

     

                "The only value of stock forecasters is to make fortune-tellers look good." Warren Buffet

    Starting in October 2007, over the next year and a half, US Markets declined more than 50%[i]. Some investors fled the market and have yet to recover.  Here we stand ten years later with this key point: If you pulled a Rip Van Winkle on October 9, 2007 and woke up today you would see the US Markets at new all time highs.

    Some more wisdom from the ages:

    "Far more money has been lost by investors preparing for corrections, or trying to anticipate corrections, than has been lost in corrections themselves.” Peter Lynch

     “We have two classes of forecasters: Those who don’t know — and those who don’t know they don’t know.” John Kenneth Galbraith

    Since March of 2009, we have been in a bull market. We completely agree that we have no idea what the market is going to do next year, next week, or even tomorrow. We feel that there is no way to grow your true net worth or meet your retirement goals without investing in the market and that equities should be a major part of your overall portfolio. It’s true that the Dow has averaged a “bear market”[ii] around once every three and a half years since 1900[iii]. Through all of that volatility, (including; The Great Depression, WW1, WW2, the Cold War, oil crisis, dot com bubble and Great Recession) it’s up in excess of 29,000%! That’s not a typo![iv]

    SECOND QUARTER 2017 REPORT

  • This Time It’s Different!?

     Michael D. Kresh CFP RF

     

    Since we have started writing these reports, we have always stated that the markets loathe uncertainty.  The unknowns of upcoming FED policy, unemployment numbers, corporate earnings and geopolitical events typically act to increase market volatility. Time and again we have seen how world events can shake the markets… Greece’s banking problems, Brexit, and stress in the middle east have all affected volatility.   Uncertainty in US politics (until recently) have also given the markets the shakes. We have often said that headlines can cause markets to overreact. Our advice is look to the fundamentals, since the effect of the headlines will fade over time.

    Many times, the media has incorrectly stated the four most dangerous words in finance “This time it’s different”. The climate in Washington is generating an enormous amount of political uncertainty. To date, the market’s volatility has been very muted. We would have expected more sharp movements in the market, however, this has not happened. Volatility (as measured by the VIX[i]) is at extremely low levels[ii] despite the inability to pass legislation and the Russian controversy.  However, I cannot guess what may happen if there is no continuing budget agreement by the end of September.

    Thus far, political, as well as international circumstances, have yet to generate economic uncertainty. Hence, and this is important, we have seen little downside in stocks. In fact, we keep setting all-time highs.[iii] So this time it’s different? (I just said these words are the most dangerous in finance.)  Why? The fundamentals are much better than the headline news.  US businesses are doing well, corporate profits have been strong, employment has been strong, yet interest rates and inflation have remained muted. Low interest rates mean that many investors are looking to stock dividends to drive yield over bonds. As of today, the S&P 500 index is yielding almost the same as the 5 Year US Government Bond[iv],  illustrating that stocks may be a better investment than bonds. For the moment, this reinforces that this time it may be different. For now, if you are wary take some profits, but otherwise, enjoy the ride.

    Remember, helping you manage your money is just a small part of what we do. Enabling you to enjoy life’s precious moments, and being there when you need us is “Why we do what we do.” Our job is to help you reach your goals; our passion is facilitating your happiness.

     



    [i] The VIX is the Chicago Board Options Exchange Volatility Index

    [ii] The VIX is about 1/3 of its high over the last 5 years CNBC.com )7/17/2017

    [iii] CNBC 07/14/17

    [iv] Investing.com 07/17/17


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    Advisory services offered through Creative Wealth Management, LLC a registered investment advisor.

    Not affiliated with Royal Alliance Associates, Inc.

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