For the last 5+ years I have been writing about good news became bad news and bad news became good, due to the Ben Bernanke and the Federal Reserve’s stimulus policies. What I mean by that is when we had bad news, it would mean that the economy was still weak and the Fed would stay accommodative and continue printing money. This caused the market to rise. On the flip side, when we had good news about the economy, the fear was that the Fed would cut back too early and stocks sold off.
This month marks a new era, the age of Janet Yellen. In this brave new world of the Fed Tapering, we are back to the good old fashioned way to monitor the economy and the markets….Good news is good news again and vice versa….and that’s why the increased volatility this year. All of a sudden all the good news switched to bad. It started with the employment numbers last week and continued through manufacturing and production.
One area that the Fed sees as a negative that I just love. The “official” inflation rate continues to remain below 2%. That scares the bejeesus out of the Fed because without stimulus we would be in full-fledged deflation. That is what will keep the Fed stimulating for as long as they want, because they have room to keep the printing presses going before they create enough inflation to become dangerous.
With an ugly January behind us, which we learned last week in often leads to a bad year, what we really need to know is what the rest of the year will bring. If we look back to 1950, the February through December period after a down January has led to a median gain of +1.3%: but still ending down for the entire year because the median January loss was -3.7%. I took it one step further and looked negative Januarys following a up year in secular bulls, I was pleasantly surprised to find out that 78% were positive, with a median gain was 4.5%.
Of course everyone is wondering whether this is the beginning of the next crash. I do not think so. To me it looks like the market is sending the Fed a message that they are worried about a declining economy and if the Fed will help and reverse the taper if necessary. I suspect that they will get that reassurance along with more positive economic numbers shortly.
This little correction should serve as a warning to all investors to “invest for need and not for greed™”. You should always be appropriately invested so you are getting the best returns, but with the least risk possible.
That’s why it’s so important for retirees to those planning for retirement to graduate to a qualified retirement advisor who can help put a plan in place that incorporates not just your investments but everything: Social Security timing and optimization, Elder care planning so you don’t give away all your money at the end of life, setting up a retirement income stream that cannot outlive as well as bulletproofing your portfolio….and it all starts with a free Retirement Income Analysis.
…… and that’s where we can help. To learn more about The Springer investment approach, which is our powerful proprietary Investment Management Strategy designed to manage risk and deliver returns, in any market…and/or get a free second opinion on your portfolio, simply reply to this email, or give me a call for a no-cost no-obligation consultation today at (916) 925-8900