A very Happy Manic Monday to you all. The global market are still in a state of flux.
In spite of the global trade tensions and on-going US political turmoil, stocks recorded a very strong performance last week. The gains were solid with the Dow Industrials up 2.8%, the S&P 500 up 1.6%, and the market-leading Russell 2000 up 1.5%. The weekly A/D numbers were strong, with 2086 stocks on the NYSE advancing and just 998 declining. Even with all this bull movement occurring there is plenty of sentimental that the market is due for a correction.
The signs are starting to add up that the United States is at the top of the economic cycle, and therefore headed down, likely into a bear market and recession, an increasing number of economists and money managers say. The main culprit for the looming downturn, they say, is the Federal Reserve, which is expected to again raise U.S. overnight interest rates on Wednesday. The Fed has been pumping liquidity into the economy via its massive quantitative easing bond-buying program, which still holds around $4 trillion of debt. That’s about to be sucked out as the central bank raises interest rates and reduces its bond balance sheet.
We are in uncharted territory. The Fed has never before in history held so much on their balance sheet, the Fed’s existence or creation came after the fallout of the Great Depression of the 1920s. The unraveling this great economic policy that prevented the Great Recession from deteriorating into the second Great Depression has no road map.
My message to you is to prepare your holdings for whatever state or economic market we will find ourselves in for the coming months and possible years. I’m not encouraging fear and that you withdraw your money from securities only to hide it under your bedroom mattress. But I’m also not encouraging reckless investing or telling you that this bull market will last for years further. The stock market moves in cycles and eventually this historic bull market will flame out and the strategy you implore now will determine how your portfolio fair during these recessive times. I suggest analysis of your diversification levels and preparation for the good times eventually being reset.
Information from this weekly email is not intended to be investment advice or construed as a recommendation or endorsement of any particular investment or investment strategy, and is for analysis purposes only. Be sure to understand all risks involved with each strategy, before attempting to place any trade.
Per usual hope you all have a great and prosperous week and an even better investment week. Will talk to you soon!!
Jamaal W Vetose
Director of Re