Welcome to our active management update on the market
Last week, Tony Dwyer, a world-class analyst with Canaccord Genuity and contributor to Proactive Advisor Magazine, answered the question: How can the market be positive with the news backdrop we have today? Especially considering:
- The Fed almost drove the economy into recession.
- The U.S. Treasury yield curve inverted.
- Inflation is historically low.
- A special prosecutor was investigating the President.
- There was a threat of a trade war.
- The global economy was decelerating.
However, as he points out, the news backdrop was the same as the 1994-95 period. Following the challenging year of 1994, the stock market took off from the low of the fourth quarter of 1994 and rallied to new all-time highs in 1995. (See the following chart.)
This does not mean we are destined for the same thing. It means that we have been in similar circumstances before and cannot rule out the possibility of new all-time highs in 2019. (See the following chart.)
Last week Jerry Wagner and I discussed about the ever-present risk in the markets. If we were to have a typical 50%+–bear market from today’s price levels, we would be back at the highs of both 2000 and 2007. (See the following chart.)
Most people are not prepared for such an experience. However, we at Flexible Plan Investments are always prepared. Our time-tested, quantitative models ignore the news headlines, seeking to remain invested as long as each rule set requires. Furthermore, our strategies are designed to be opportunistically invested or defensively positioned as the markets dictate, not as the news of the day dictates.