What Is Going On In The Markets?
We are also entering the strongest period in the markets, historically. Colder months generally bring stronger average returns for the markets.But just like the fellow who drowns in a lake that averages 3 feet deep, counting on averages when investing can be a dangerous thing.
Although the stock market ought to be going up now, it is not. And I deal with the reality of what is actually happening, not what is expected to happen. As John Maynard Keynes once said, “the markets can remain irrational longer than you can stay solvent.”
And this market needs to be treated with great respect. Our economic foundations are still very weak despite trillions of dollars of government stimulus money at work.
Steve Hochberg, who writes the Elliott Wave Financial Forecast, said in last Friday’s newsletter, “The decline that started October 19th should capture all awards in the bear market record book.” Gulp. That is a strong statement. Did you notice the absense of weasel words so prevalent in these kinds of prognostications? I did.
Some of my work points to a major market low a year from now. Does that mean that we could be entering a year long slide that does not end until a year from now? I really don’t know.
By some measures, the past 2 weeks have seen more selling pressure in the stock market than at any of the market lows of this past year – despite the S&P 500 Index** only being down 5.62% from its October 19th highs.
I expect us to get a bounce after all this selling has run its course. The nature of the bounce and subsequent zigs and zags will tell me whether this has just been a temporary “correction” in a continuing up-trend or the beginning of a more serious decline. Right now, I just do not have enough data to know for sure.
I try to ignore the corrections and focus on the major trends, but every major trend change begins with what appears at first to be just a correction within the previous trend. Please know that I am watching this unfolding situation very carefully.
Thank You for Your Referrals
Junk Is Still On The Run
Regardless of our success with junk bonds this year, they are not a slam-dunk investment. In fact, I would never recommend buying them outside of a managed account. Even though we are having great success with junk this year some of these funds lost 50% of their value last year. An investor without a plan to deal with the ups and downs of junk bonds can have a painful experience.
Riddle of the Week
IRS Extends 60-day rollover period for RMDs taken in 2009
- -By November 30, 2009 or ”
- -The end of the customers’ normal 60-day rollover period for taking distributions and depositing the assets into another retirement account.
-The rule that allows for only one IRA rollover per calendar year still applies.
-RMDs taken by non-spouse beneficiaries are not rollover eligible.
What’s Going On In Your Portfolio?
Our Flexible Income* model ended the month with a gain that seemed puny compared to some of the previous months, but it was a gain. And, any gain is a good gain.
The past two newsletters have featured the new reporting format for our Flexible Income* and Careful Growth* strategies. This week you can see how our Balanced* strategy looks. Balanced* is a 50/50 mix of Flexible Income* and Careful Growth*. Some firms call this blend of strategies a “growth and income” style, but whatever you choose to call it, Balanced* is the strategy that more HCM clients use than any other.
** The S&P 500 and Nasdaq Indexes are unmanaged lists of stocks considered representative of the broad stock market. Investors cannot invest directly in the S&P 500 Index