Jeff’s Weekly Stock Market Commentary: Secret To Buying Low and Selling High
Everyone wants to sell high and buy low.
The old adage about investing is that you should buy low and sell high. And that is sage advice. The question is how do you put that into practice? This may sound simplistic, but in order to buy low you first have to sell high!
The S&P 500 set all-time highs last July. ALL-TIME. So, does that mean that you should sell now and move to cash and/or US Treasury bonds and wait for the market to correct?
In 2000, the market hit an all-time high and declined soon after 46%. In hindsight, any time between March and September of 2000 would have been a great time to sell all of your equities and move to cash. Those that did would have maintained their account balance while those that didn’t sell likely saw losses of 46% or more. Those that didn’t sell their stocks and instead held through that crash missed their chance to sell high.
Jeff’s Weekly Stock Market Commentary: Will The Fed Kill Our Economy?
Last week the Federal Reserve shocked the markets by emphasizing that a December rate HIKE was “squarely back in play”. As a result, the odds of a December rate hike have gone from roughly 30% before the announcement to around 60% now.
If the Federal Reserve raises interest rates in December—even by 1 basis point—I believe that it will hasten a recession in the U.S. economy. More importantly, it is possibly that even the threat of a December rate hike could be the catalyst that causes the stock market to retest the August lows.
The S&P 500 index tumbled in August of 2014, bottoming out on August 24th at 1824. As I write this, the S&P 500 index is trading at 2105. Re-testing the August lows represents a 13% drop from today’s level. Keep in mind that virtually all but one recent economic data point shows that the U.S. economy continues to slow.
So why would the Federal Reserve raise rates into a slowing economy when they have repeatedly said that any increase would be ‘data dependent’?
Jeff’s Weekly Stock Market Commentary: Retirement
Those 5-10 years or more from retirement have time and money on their side.
For those who are retired or near retirement, the number one priority must be to avoid significant losses. Many investors experienced losses of 30-60% in the crash of 2000-2003 and then again in the crash of 2007-2009. Depending on their age at the time, those who were still working and contributing to their 401k’s recovered over the ensuing years.
Keep in mind, though, that much of that recovery occurred because they continued to put more money in on a monthly basis. Their monthly contributions over the years 2000-2002 and/or 2007-2009 went into a market that had retreated by almost 50% from the highs. As the markets resumed their uptrend their accounts gained ground quickly.
That taught some investors that they will be fine as long as they hang in there because the markets will eventually recover and all will be fine. That may be true for those that are still 5-10 years or more away from retirement. They are probably at the highest salary level of their careers and are able to contribute a higher percentage of their income to their retirement nest egg. They have time and their income on their side.
Jeff Voudrie’s Weekly Stock Market Commentary – Cyclical Downturn
The International Monetary Fund can be considered the worlds’ central bank. As such, the IMF has its finger on the pulse on economic activity globally. So when the IMF and the head of IMF, Christine Lagarde, begins to sound an alarm it behooves investors to take note:
“After more than a decade of stellar growth, emerging markets are falling headlong into new era of anemic output and market turmoil. Investors are pulling cash out in droves, fueled by an unexpectedly fast deceleration in China, the world’s second-largest economy. The IMF warns of a coming wave of corporate defaults after five years of gorging on central bank-fueled cheap credit. Emerging-market woes risk fomenting contagion in U.S. markets.”
Here are some more quotes from the article that are worthy of attention:
“…Christine Lagarde faces some of the most volatile conditions in global markets since the financial crisis, a reflection of deep-seated worries about the world economy’s course.”
Jeff’s Weekly Stock Market Commentary
Last week was a difficult week for those of us that own bond ETFs like symbol TLT and EDV because we saw bond yields jump which resulted in the value of our positions going down. The recent statement by the Federal Reserve is partly responsible because the statement introduced uncertainty and confusion as to the direction of interest rates.
According to one research firm, last week saw the biggest week-over-week percentage gain in global bond yields ever. For instance, the Netherland’s 10yr bond had a 73% move in yield. The 10 year German Bund had a whopping 157% move in a single week!