Markets Prefer Certainty

Amidst the continuous stream of news and recent market fluctuations, a dash of certainty was injected into stocks and bonds with this week’s Federal Reserve meeting. If only for a day.

Several factors are at work –

  • interest rates, per the US Fed
  • future government spending policy
  • rates of employment
  • market valuations

among other factors.

A dash of certainty was injected into stocks and bonds with this week’s Federal Reserve meeting. If only for a day.

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Investing in the Next Facebook?

How many people caught the news last week that Facebook officially changed its corporate name to… Meta? And changed its stock ticker symbol to MVRS? Presumably, MVRS is short for “metaverse.” What is the metaverse and is it the next “hot” investment? (In other news, Facebook is looking to distance itself far, far away from discoveries that the company knew full well for over a decade the damage its central social media platform would inflict and has inflicted on people of all ages, especially children. But that is not the topic of today’s TGIF 2 Minutes.)

Regarding Meta, CEO Mark Zuckerberg says succinctly, “the metaverse will be the successor to the mobile internet.” Gaming and alternate reality seem to be at the forefront of the concept with bitcoin and cryptocurrency central as well. The whole thing sounds huge.

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A Couple of Quick Notes

This note would be even better in a short video…so stay tuned for that version next week! In the meantime, a couple of quick written notes:

This week the “Energy Information Administration,” an actual division of the US government, warned that nearly HALF of US households who heat their homes with natural gas will pay 30% MORE this year, yes 30%, versus last year.* AND that if winter is 10% colder, then bills will go up 50%! If winter is 10% warmer, then bills are still projected to go up 22%. Can’t wait for that cold weather!

Nearly HALF of US households who heat their homes with natural gas will pay 30% MORE this year.

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Reacting Can Hurt Performance

As they say, “a picture is worth 1,000 words.”* Please do whatever you need to do with your phone or laptop to make sure the graphic below is visible. And make sure to ZOOM IN or turn the phone sideways (or ask me to send you the PowerPoint or PDF version of this slide).

With that said, the title of the slide is: Reacting Can Hurt Performance. And here is a question,

Who is NOT scared these days or after this week?

Savings and investing decisions need to have been made before today. Reacting can significantly hurt performance.

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Risk Off & Risk On

NERD ALERT: This edition of TGIF 2 Minutes will get a big “wonky” but still worth the read. A good number of people reading are familiar with the terms, “risk off” and “risk on,” terms that are used frequently in financial media and by financial industry traders and risk managers.

Even for a business owner or anyone familiar with risk, the term “risk on” or “risk off” may make sense. But for those still wanting clarification on how these terms relate to personal savings and investments – specifically the stock and bond markets – here are a few details.

First, the reason it made sense to highlight this topic is that just this week the US Fed said,“[The US] economy has made progress toward its goals, teeing up bond taper.” *

Think of “risk ON” as increasing risk and being comfortable with taking on more risk; whereas “risk OFF” would be decreasing risk due to factors that make risk uncomfortable.

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A Quick 2Q Wrap-Up

Just like that it is July 2021! That means both the 2nd Quarter and 1st Half of the year have come to a close. Here are a couple of quick notes about the quarter including a few things that changed and did not change on the year.

Stock and bond markets along with portfolio performance continued to be strong. It seems there is less caution in the air with an economy continuing to come out of the pandemic. Although the expression “the most unloved bull market” is still on peoples’ minds. Reason being that worries abound as the US Fed and Treasury continue to pump record amounts of money into the US economy. And there are plans for the stimulus to continue. This state of affairs risks inflation among other economic maladies.

Stock and bond markets along with portfolio performance continued to be strong in 2Q.

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Gut Check in Rocky Markets… 2021 Version

From the 2014 & 2016 Archives of TGIF 2 Minutes comes a timely message – updated for 2021, as markets could get fairly rocky (read: volatile) with inflation fears, unprecedented US government debt issuance and money printing. Caution is warranted. However, timeframe and a PLAN are key.

Have you asked yourself lately…

  • “Is this the ‘Big Dip’ in the markets they have warned about?”
  • “Should I be selling my stocks?”
  • “Should I be selling my bonds?”
I stress to my clients and friends: Do NOT allow short-term market moves to instill fear and lead to poor decisions.

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Quick 1Q Wrap-Up

In the interest of the upcoming Easter and current Passover holidays today’s edition will be quick. Similar to the 1st Quarter of 2021 which seemed to FLY BY!

Market – and my clients’ portfolio – performance was strong to start the year. There is caution in the air, however, as 10-year US Treasury yields climbed to levels not seen since early 2020 before the pandemic began. The swiftness of the rise in bond yields warrants caution in the overall stock and bond markets.

The swiftness of the rise in bond yields warrants caution in the overall stock and bond markets.

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The GameStop Incident

OK, I’ll admit it. Until last week I had not heard of Gamestop – the company or the stock.

Of course, I have now heard of Gamestop and more including Reddit, wallstreetbets, Webull and Keith Gill (Keith Gill was called the “Original O.G.” by one trader*). And as a financial professional I am knowledgeable about what short-selling is and how “the shorts”, as they call traders who sell short stocks and other securities, can get “squeezed”. Gamestop brought shorts, short-selling and short squeezes to an entirely new level.

As Brett Danko, the founder of my firm, recently described it, “the Gamestop incident of last week transcended the world of stock trading… both for major institutional traders and individual traders”. Keith Gill and the individuals trading off chat board messages transcended stock trading similar to how Michael Jordan transcended the sport of basketball and even Muhamad Ali transcended the sport of boxing. These people and events became larger than real life – for a time.

Emotion is nearly impossible to control in trading – especially when video and social media are added to the equation.

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All Cash?

“Do I go to all cash?”

“Do I go to all cash at least until after the election?”

More than a few people have asked me this question over the past several months. Even more people have probably asked themselves this question. The answer, if historical data of the S&P 500 index is a guide, is a firm NO.

This chart illustrates the impact of missing just the 25 best days in the market, the 15 best, 5 best and 1 best day.

The chart above illustrates the impact of missing just the 25 best days in the market, the 15 best, 5 best and 1 best day. The days are NOT CONSECUTIVE, they are random best days. If missed, the majority of stock market gains are missed.

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