2025 Will Be Unpredictable, So Don’t Predict
Monthly Outlook: January 2025 This is the time of year when we all reflect on the past, ponder the future, and make promises and plans, some of which we’ll keep. Wall Street, similarly, can’t help themselves in making predictions and forecasts, most of which will be wrong, based on history. We all know this, factually, but investors still hang on every word, especially if it agrees with our own view. If TV news would put the forecaster’s actual track record below their on-screen image, we’d surely turn off the TV. But forecasters are rarely held accountable, so the fascination continues. 2025 will be unpredictable for many reasons, especially with Trump in the White House. That’s not a political statement, it’s just an observation of his operating style. Will he deport millions of people on Day One? Will he slash $trillions from the budget? Will he buy Greenland? Many other countries [...]
Do You Know What Your “Risk Tolerance” Really Is?
Monthly Outlook: December 2024 The U.S. election outcomes surprised many and have already had a meaningful impact on markets around the world. The expected upcoming shifts in U.S. policies are creating new winners and losers and the markets are adjusting quickly. For example, November was a very good month for U.S. stocks, with the S&P500 up +5.9%. International stocks however, especially emerging markets like China and Mexico, are much weaker due to expectations of tariffs and other deglobalization policies. And bonds were both up and down in November, as interest rates first rose on inflation concerns, before falling back on slowing economy concerns. One thing is for sure, and without being political, the new regime and their proposed policies are striking, disruptive, and sizeable. As investors, we should expect more volatility, more uncertainty, and more need to be flexible and open-minded. We probably don’t even know what we don’t know [...]
Post Election – What’s Changed
Monthly Outlook: November Post Election 2024 What a difference an election can make! The outcome of the U.S. elections on November 5th surprised many, including most polls and pundits. Republicans did better than the polls suggested pre-election day and they now control the White House, House and Senate. Such a rout has important cultural and civic implications, but it’s not our place to dissect those. Instead, we’ll stay in our lane and share with you how this political shift is impacting markets already as policies and appointments are being announced. Because many of the announcements are objectively shocking, the impacts on markets are significant and we can already see clear winners and losers in markets. Inflation, Interest Rates, and Bonds It’s often said that the bond market is the “smart money,” and the stock market is the “emotional money.” If so, the smart money is now concerned about resurging inflation [...]
How We’re Investing for the Election
Monthly Outlook: November 2024 Markets have rallied for the better part of two years now and the S&P 500 hit another new high earlier this month. The NASDAQ and international stocks, too, are near all-time highs. This leaves the market at peak valuations levels, with a 28x P/E ratio and a TMC/GDP of 1.9x. Bubbles aren’t that surprising, that’s not the point. The big question is why markets are so exuberant, just five days away from critical elections that are so polarizing, so uncertain with 50/50 polls, and so different in their expected outcomes? Normally, so much uncertainty would lead markets to recede and consolidate as they await the election outcome. When we look back at elections in 2012, 2016, and 2020, we see more consolidation than we see this year. And yet, this election seems closer and more contentious than those. It doesn’t make sense. The investment news channels [...]
Is This a Stock Market Party After Midnight?
Monthly Outlook: October 2024 Stocks and Bonds continued to trend higher in September and have proven to be more resilient than many naysayers predicted. Stocks dropped 9% in August but came right back. Then stocks dropped 4% in September and, again, came right back. Nothing seems to kill this bull market party, at least not yet. This kind of market behavior (slip, and a save!) tends to make investors falsely confident, willing to hang on, and even buy more. Stock market bubbles always feel good, almost by definition, and we’ve been developing a bubble for the past year or two. That’s how we get to 100-year peak valuations like we have today. Similarly, parties (I’m told) are always raging and the most fun late into the night. But it rarely ends well for those who stay too long. Might this stock market party be raging well past midnight already? The [...]
How to Prepare for the Coming Recession
Monthly Outlook: September 2024 Maybe you missed it, but stocks gave us a big head fake in early August, with the S&P500 dipping 9% before bouncing back 9% for a wild round trip over six weeks. This volatility has some investors wondering if this was a precursor of more volatility to come or was just one of those random market moves that proves how risky investing can be. Time will tell. As trend followers, the volatility did cause us to briefly move to protection mode by selling a few holdings. But within a week or two, the uptrends resumed, and we were able to buy back and get back to full-on growth mode. We know it’s a little frustrating to get whipsawed like this but it’s the best way we know to stay disciplined and avoid “the big loss.” Our portfolios are still up nicely over the past twelve months [...]