Jeff’s Weekly Stock Market Commentary: The Biggest Political Earthquake
Almost a year ago I remember predicting that the S&P 500 would set lower lows before it reached higher highs. The S&P 500 hit an all-time high of 2132 back on July 20th of 2015. As a result I had been moving out of stocks as we approached August 2015.
That turned out to be prescient because the markets had a 14% plunge in August of 2015. This is what the plunge looked like—a waterfall type event:
The market briefly recovered about half that loss then dropped back down to the lows in October 2015. Over the next few months the markets climbed back up to near its all-time high. Then, as we started 2016, the Federal Reserve announced it would be RAISING interest rates and it set off a market panic.
The stock market collapsed from 2116 on November 3rd to 1810 on 2/11/2016. It was the worst start of a year EVER; A plunge of 14.5% over a 3-month period.
Federal Reserve Chairwoman Janet Yellen testified before Congress yesterday—I’m sure we were all glued to our TV’s hanging on her every word…NOT! Did we really expect her to say anything new and/or to change course? I didn’t. Last week she confirmed that the economy is continuing to slow down and that poses ‘risks’ to her forecast for growth. Thus rate hikes for this month are off the table.
A brief recap for my clients (they have a life and are out enjoying it instead of parked in front of CNBC) is that our esteemed Fed Chairwoman seems to be confused. Changes in the direction of interest rates traditionally occur slowly over time so that the markets can build those projections into their investing logic.
The more visibility in the economy and the interest rate environment the easier it is for investors and money managers to structure their portfolio for the long-term.
I’m Jeff and this is my Weekly Market Commentary for May 18, 2016.
I am 51 years old and for most of my life I haven’t really had any hobbies. Over the last year, though, I have discovered that I really enjoy sailing. The power of the wind is incredible and the thought that sails can be used to harness that wind and transfer the energy into forward propulsion seems almost magical.
One big difference riding in a sailboat versus a motorboat is that sailboats lean over as the sails catch the wind. This is known as ‘keeling’. Initially, it feels quite dangerous as the boat starts to roll to the side 45 degrees!
It is very unnerving for a lot of people—like my wife! She prefers keeping her feet firmly planted on terra firma. Keeling reduces the drag and helps the boat start to skate across the water. Of course the wind doesn’t always stay constant so the degree of keeling keeps changing.
The Federal Reserve’s failure to raise interest rates at its last meeting has resulted in the credit market projecting that the next interest rate hike won’t occur until December of 2017.