Doris Day, the top box-office draw of the 1950s and early ’60s passed away last Monday (5/13) at 97. Although she was still in apparent good health late last year, she lost her battle with pneumonia. As she had always been a personal favorite, and with my own 97-year-old mother recently leaving hospice after a miraculous recovery from pneumonia, the story caught my attention.

While Doris Day movies are now considered passé, the antithesis of relevant movie making, they perfectly matched the sentiment of the time. Everything seemed upbeat, and the “problems” she had to deal with were, in hindsight, pretty insignificant compared to today’s social scene.

Some may not recall that in addition to her movie career, Doris Day was also a pop recording artist. She got her start in the big-band/radio era but had a singing career that spanned two decades. Along the way, she had many No. 1 records and appeared often on the Billboard charts.

The song most associated with her was probably “Que Será, Será.” Although the song made it to No. 2 on the hit parade and was the theme for the five-year run of her TV show, Day was not a fan. “I just, I didn’t think it was a good song,” she once said.

I have to say I agree with her. While I like the tune, the lyrics turn me off. “Que Será, Será” translates to “Whatever will be, will be.” I could never approach life that way. I have always been more hands-on and full of self-determination.

I guess it’s not surprising that when it came to investing, I took a similar approach. Too often, I saw that investors who took a “whatever will be, will be” approach ended up getting slaughtered when a ’50s-like bull market came to a crashing end.

A bull market is certainly like living in the 1950s. In the ’50s, life was easygoing. The economy was roaring, and the stock market was soaring. It seemed like it would never end.

I know that’s how I felt in my first 10 years of life. Then a recession hit, and you could see the daily concern on my father’s face. He’d started his own business in ’54, and it had done well for him. Three years into it, he purchased a lot for a new home. He was in the midst of building it when the recession hit and money got really tight. It was touch and go for a while. But he worked harder and recovered, seeing even greater success in the ’60s.

Investors can be lulled into a sense of security during the good times. They probably take on more risk than they should when times are good. Unfortunately, as Dad found out, the recession or some black swan like it, always hits eventually.

One of the best ways to avoid the heartache and losses that such an unpredictable event can cause is to invest as if such an event is always possible. My experiences from being committed to actively managing my portfolio for over 50 years have given rise to this conclusion.

The ’50s was also when “buy and hope” investing came of age. Believe me, no one would have told an investor to just “buy and hope” in the ’30s or ’40s! Instead of sitting and taking it, the dynamic risk-management approach that I believe should guide investing activity seeks out opportunities for both profits and risk avoidance.

A “que será, será” investing approach may be a pleasant tune to whistle while you work through the good times, but it can sound more like a funeral dirge when bad times hit. During a nasty economic environment is not when you want someone to remind you that “whatever will be, will be.”

Market update

The stock market indexes all tumbled last week, as did gold. Bonds, once again, were a safe harbor.

Still, just as bonds have been positive for both the quarter and year to date, stocks have produced the same results in the two periods. The difference has been in the degree of success. While the total bond market ETF (BND) has gained 3.5% this year, the S&P 500 ETF (SPY) has gained more than four times as much.

Last week’s stock market losses were primarily confined to Monday (5/13) and a late-day sell-off on Friday (5/17). Stocks rallied after Monday, first on technical reasons that we suggested in last week’s update, and then as we started to receive some positive economic news later in the week. Through Wednesday, most reports disappointed; thereafter, they all surprised to the upside.

Yesterday seemed to be a reprise of an old tune. Stocks were down, as fallout from the trade talks with China continued to buffet financial markets.

In this regard, I saw a surprising statistic: Chinese exports to the United States are just 3.5% of the Chinese economy, down from the 11% level of a number of years ago. And Chinese imports into the U.S. are just a tiny fraction of that percentage. Yet the markets seem intent on focusing solely on the trade battle.

As a result, investor sentiment continues to plummet. The American Association of Individual Investors’ bullish sentiment is just in the mid 20% range, while bearish opinions have jumped to a level 10% higher. These numbers are beginning to reach levels more supportive of a rally than a further dip.

However, yesterday’s stock market action once again sent the S&P below its 50-day moving average. This could mean a retest of its 200-day support level and my 5% dip projection of three weeks ago. Still, we continue in a “golden cross” environment (the 50-day price moving average is above the 200-day version), and that means the intermediate term outlook remains bullish.

But our short-term indicators remain bearish. And the NASDAQ 10-day returns are now trailing the S&P 500 Index. In the past, this has yielded smaller gains than the opposite condition.

The unofficial first-quarter earnings-reporting season ended last Thursday with Walmart’s report. Earnings this quarter were disappointing in the sense that the growth rate seems to be leveling off and the number of positive earnings surprises has once again come in lower than the preceding quarter (while still higher than the average quarter). This season contributed little to investors, as the S&P 500 actually fell 0.4% during the period (4/10–5/15).

Further supporting the case for short-term bearishness, some of our shorter-term day-trading strategies have been in cash during the last week. Just a few weeks ago, they were fully invested and leveraged.

There is some positivity in that we are approaching the Memorial Day holiday. In the past, the two days before and the day after the holiday have tended to yield gains. And our Market Regime indicators remain supportive of further stock market gains, albeit with more volatility.

Bonds continue to decline in yield as many market gurus are calling for two rate cuts this year. Remember six months ago when the Street was certain there was going to be a rate hike by the Federal Reserve?

I believe it is likely that the declining yields and corresponding rising bond prices are coming to an end. The change has been too far, too fast.

Yields on the 10-year have fallen 80 basis points, while a fed fund cut (if it ever comes) will at best be 50–75 basis points. Furthermore, the relationship between the yield of the three-month T-bills and the 10-year government bond has once again inverted. That’s not likely to continue unless signs of a recession increase. Yet, presently, they seem to be waning a bit.

“Que Será, Será” won the Academy Award in 1956 for Best Original Song for an Alfred Hitchcock drama starring Doris Day and Jimmy Stewart. The name of the film was “The Man Who Knew Too Much,” a condition rarely applicable to investors. Whatever will be, will be.

All the best,


Jerry C. Wagner is Founder and President of Flexible Plan Investments, Ltd. Formerly a tax and securities attorney, Mr. Wagner recognized early on that technology and hedge fund techniques could be applied to help individuals successfully invest, while managing their downside risk. After spending time pioneering new techniques in market analysis, designing quantitative methodologies, and managing investment portfolios, Mr. Wagner founded Flexible Plan Investments in February 1981.

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