Special Market Update: Pain & Gain

With stock prices, even bond prices, falling faster than they rise the next day, fear is dominating many investors’ thinking about investing and many current life activities.  Schools, restaurants, churches are closed, temporarily.  Gatherings of even a few people are discouraged.  Numerous US states are implementing business lockdowns and stay-at-home strategies to contain the spread of COVID-19.  At current, there are no tools (vaccine, drug) to address this novel virus, other than shutting economic activity down to buy time for the doctors and drug scientists.  Unclear is when we are going to open the economy back up (April? May?), or if we can make it through the year without shutting down again in the Fall.  Closing the economy is adding to everyone’s fear of the unknown – a multi-dimensional fear not limited to just Coronavirus, and including the prospects of severe economic/financial damage.  Put simply, most all news seems bad.

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RESOURCE PAGE: Coronavirus and Market Volatility Updates from Funds

In pursuit of providing clients access to timely and relevant commentary to the current coronavirus market impact, below are links to research and analysis updates we are receiving.  The aim is to share articles that add or enhance the understanding of the root worry (coronavirus and it’s impact on the global economy) and/or provide historical perspective on prior market corrections.

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Market Alert – Follow The Recipe

I am hopeful this will be a final Market Alert relative to the past few weeks of hysteria, fear, and market turmoil. The market spoke loudly yesterday (Thursday, March 12th) as it blasted on all areas of the financial markets – gold, bonds of greater risk orientation, and stocks around the world.  We are hopeful recent action was the capitulation event for the market forming a bottom – it never feels like the bottom near the bottom.  Time will tell.  We do not know, we cannot model how Coronavirus will evolve and/or how it is minimized.  We expect Washington will deal with the public erosion of confidence being expressed in the economic and financial markets both here and globally.

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MARKET ALERT for March 12, 2020 – “Market Stress”

To start, one should read this following thought several times: “It never feels like a low near the low”.

Market Stress is absolutely no fun.  After all these years (over 40), market drawdowns are terrible and bewildering; confounding one’s ability to comfort others when no one knows the future.  We can review history (a lot of examples) to offer perspective, but providing certain future direction is not possible.  We are all in it together.

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MARKET ALERT for March 9, 2020 – “Year of the Rat”

Ironic – today, Monday March 9th is the 11th Anniversary of the March 2009 stock market lows, meaning this date was the start of the current bull market advance (we’re wishing it runs longer).

Generally, we are not fond of writing Market Alerts, as it often signifies market action that is unsettling to investors and clients.  Further, no one knows exactly how to model a global pandemic.  And, we usually don’t give a passing thought to the entity that China uses to describe its New Year, this year being called the “Year of the Rat.”  Not to travel that path; yet most are well aware that rats carry all sorts of disease and illness if active pursuits of cleanliness and pest control are not followed.  The global health environment appears to be actively searching for effective measures to curb the spread of Coronavirus.  Additionally, Washington DC appears to be treating current events as mainly a health-policy issue.

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“Hysteria Unmerited” – March Commentary

Does any investor believe the last week of fast-moving negative market action was reasonable?  Continuing our theme relating to seeing clearly with 2020 vision…. from our perspective, and many other research pieces we are receiving, indicates this past 7 days was “hysteria unmerited.”  It is mind boggling how many traders (not investors) display a “shoot first and ask questions later” mentality.  When one is unable to understand or is unable to quantify a concern, natural intuition reaction is “jump, and look later.”

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MARKET ALERT – Seeing Clearly in 2020 Vision: Keep Seat Belts Fastened

If we owned a crystal ball, we might know when to sell before big market moves down. If we owned a crystal ball, we might also know when to buy at the market low, before big moves up. Would you like to use a crystal ball for your investment timing tool? We know that if you rely on the crystal ball for investing, sooner or later you will be dining on crushed glass. No one owns a crystal ball that works. Don’t attempt to use one.

Given the volatility in the global and domestic markets this past week, it may be helpful to summarize a few thoughts for consideration:

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Market Catches the Coronavirus: Thoughts Around Current Volatility – 2/29/20

In recent days, the US financial market’s relative calm has fallen victim to rising fears relating to the coronavirus – more technically referred to as covid-19.  In just two days, the S&P500 and Dow have “skinnied” by more than -6% and the loss over the last week roughly -7.5%.  Many international markets are down even more sharply, especially amid already weak or recession-like economic data.  This is a stark contrast from the very attractive gains the market was enjoying in February as the narrative around the new virus seemed to be calming/contained from when it first began hitting newswires a month ago.

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Seeing Clearly in 2020 Vision: “Red, Blue & You” – February Investment Commentary

We continue our theme relating to seeing clearly with 2020 vision. January started the new year and new decade with positive action – new stock market highs on the first trading day of 2020 and 5 additional dates from there with the most recent occurring on January 17th.  Since then, the market caught the flu.  Volatility jumped toward the end of the month, as China “exported” fears of a contagious and not well understood Coronavirus.  The S&P500 Index forfeited away 3% gains to close marginally negative at month end.  Stocks, both domestic and foreign, showed “flu-like” symptoms, while bonds offered a “safe haven” with yields falling (prices rising).  Client portfolios with more bonds performed better than those with greater stock market exposure during January.

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“Hindsight is 2020”, “2020 Vision” & “Sparks Start Fires – Nvest Nsights Q4 Newsletter

Happy New Year, and new decade!  Time flies – just twelve months ago investors entered 2019 questioning whether the bull-market might be dead following a relentless and jarring 4Q’18 decline coupled with anxiety that the Federal Reserve would continue pursuing step-like rate increases despite rising uncertainty related to trade and tariffs.  At that time, who would guess that the year would provide the most attractive full-year market performance in over 6 years?!

In this quarter’s update, “Hindsight is 2020” provides a quick recap of the recent year, but more significantly why it is so important to battle temptation to invest based upon short-term worries or negative headlines alone.  Continuing, “2020 Vision” [bear with us as we enjoy the easy puns available this calendar year] discusses the key themes we’re focused on this year and how those shape our expectations/forecast for the broad economy and investment markets in the upcoming year.  Among the themes are a Fed that appears on-hold; the Money Supply (M2); international economic fundamentals and investing opportunity; bond markets; and a US Presidential election year.  Lastly, “Sparks Start Fires” offers quick thoughts on escalating middle-east tensions and how these geopolitical uncertainties may cause market jitters in the short term.

The printer-friendly version of these newsletter articles can be obtained here: Nvest Nsights – Q4 ’19 Newsletter.

Also included in the newsletter (and posted separately here), our personal finance topic this quarter overviews the recently passed The SECURE Act and broad implications for both owners and beneficiaries of retirement accounts.

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