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Market Update 10-28-2020

Brent E Chavez

Market Update 10-28-2020

Please note, this video was recorded on Tuesday, 10/27/2020.

Video Transcript:

Hello everyone! I hope this video finds you well and healthy. It’s Tuesday afternoon and I just want to get a video out to all of you in light of the election coming up and maybe address some concerns you may have about what I’m thinking or what I’ll be looking for during this period.

Well, it can be a time of volatility, but the markets have been relatively calm here lately. We’ve been in a pretty tight range from September… up and down, up and down, but staying in a relatively tight range in the indexes and we suspect that to continue for the near future.

We want to let you know we are still continuing to spend a lot of effort and time in looking at the charts, looking at the liquidity flows from a monetary standpoint in and out of the markets, the overall economy itself what it what is happening there. We see that there continues to be a large stimulus in the economy; it will continue to be there for the foreseeable future of liquidity infused into the system from the Federal Reserve. Charts are all pretty healthy, not only with companies here in America and indexes here in America, but we’re seeing around the globe pretty healthy charts and seeing some breadth increase, meaning the participation by other sectors here of late, which is a healthy, healthy thing to see happen… we think that’s going to continue. We still feel that the markets will be higher by the end of this year – a lot based on the stimulus that is in the system…. less and less places for people to find places to invest money in and get some type of return that is meaningful. Here in the US, and the US indexes, is one of those places where the globe looks for that investment. So we can think it’s going to continue to be strong through the rest of the year.

Certainly due to the presidential election, we could again see some volatility. But overall, most people don’t want to believe this, but very few presidents have a meaningful impact on the economy based on what history says. As we look back through history, back to Eisenhower, we’ve only seen two presidents with negative returns…. that being George Bush and President Ford’s tenure in office is the only four year period, and when it came to George Bush, an eight year period, where there was a negative return. And the rest have been all positive returns for the markets… and we’re talking in particular the S&P 500 in this instance. It has been some very, very strong periods to be invested in the market. President Clinton had over a 200% return on your money during his eight year tenure. President Obama, he had about a 182% return over his time in office. So again, we’re seeing that who’s in office can have some effects, more volatility than overall market returns.

So, looking long term, again, the place to be is generally in the markets based on what you can handle and what your risk tolerance is.

Could we have some volatility creep up? Yes.

If we see that Joe Biden becomes president, are there gonna be some things that we want to look at from a planning standpoint or an investment standpoint that we’d want to change? Yes.

If President Trump stays in office, will we look for opportunities or any type of changes under his tenure that we can take advantage of? Yes.

So it really doesn’t matter to us in how we’re going to manage your money, we’re going to look for opportunities. We’re going to try to find the places that we feel that we can get a reasonable return for the risk that we’re taking and continue to look to grow your assets over time and not put you through any type of major drawdown in your portfolios. We’ve done been pretty good at that – managing drawdowns here the last several years. And we will continue to be diligent at that. But, we still have to have market exposure to grow your portfolios.

So, to sum everything up: we’re not super aggressive right now in the markets. We are sitting by ready to make any changes, whether it is to reduce our exposure in the markets and raise cash, or to go in heavier into the markets. We’re ready to do either/or, but at this point we are invested in the markets. We’re going to continue to be invested in the markets through the election, unless again some things change here over the next several days, which can happen. But we’ll be ready to adjust to those changes.

So I just wanted to get this out to let you know that we’re working hard. The amount of time that we’re spending looking at your portfolio’s has not been reduced at all. Again, as I’ve said in past videos, this is a war getting through COVID. It’s a war, and lots of battles are going to be fought through this war until we get through this. And so we just got to make sure we win more battles than we lose so that we win the war. And that’s what we’re going to continue to do… be diligent and making sure that we do the very best job for all of you.

You deserve it.

You put your trust in us, handling your wealth, and we take it very serious and we’re going to continue to be really diligent and work hard. If you have any concerns, any questions about anything you’re seeing or hearing or anything to do with your portfolio, please give me a ring… give me a call. We look forward to speaking with you. And if there’s anything that we can do to help you or you need, please reach out to me or Kelsey; we’ll do our best to make sure we we help in any way possible. Take care. And we look forward to speaking with all of you soon. Bye bye.

Brent Chavez
Investment Advisor Representative
bchavez@aeinvestmentsgroup.com

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Position & Market Update 2-27-2020

Brent E Chavez

Video Transcript:

Hello everyone. Brent Chavez, Aequitas Equitas Investment Group. I hope this video finds you well. It is Thursday afternoon, and we are in the midst of a market crash that is somewhat unprecedented in it being a draw down in such a short period of time. I just wanted to give you a follow up and tell you again, where we stand, a follow-up to the two videos I sent you this last month of what we’re doing to protect your portfolios, has been working tremendously. But, I want to go a little bit deeper as to what we saw, what we’re seeing that made us do something that is very rare for us as a practice to go so defensive. As many of you know, it’s not something we like to do, those that have been with us for a long period of time. 

I’m going to share with you some things that we saw going on at the end of January that concerned us. As I mentioned in my video from January, we had had a big run up. We had stretch valuations in the markets. We were seeing a flight to bonds, globally, inflows to bonds were really up ticking. And as the yields were dropping, buyers would come in, grab those bonds. No matter how low those yields were, buyers were showing up. And at the same time seeing the deterioration of the many individual stocks in indexes in sectors globally that was a concern to us. We’re going to touch on again this is not going to be all encompassing of what we’re looking at for you on a daily, weekly, monthly basis, but just a little bit deeper than the last two videos have been. 

So again, back here in January, the S&P had hit a short term target that we had around 3300. We had noticed as we looked around, there were some canaries in the mines and red flags, so to speak. We’re going to take a look at them.

We see here some sideways action in the S&P 500. We saw it ticking up for a few weeks after we went defensive with all your portfolios, but we felt that that was more or less a “sucker’s rally,” as I like to call people being taken in before the fall off the cliff, potentially was going to take place. We’re here today as we do this video around 3000, a little over 3000. So again, a pretty sizable pullback in a very short period of time, not something that we knew was going to happen, not something that we said was absolutely going to happen… we actually said we don’t know what tomorrow brings when it comes to the stock markets. The only thing we can do and we do do for all of you is to look at the data and make educated decisions based on the data that we see come in. 

We’re going to move a little bit further into our next chart. 

Here was something that got concerning here over a couple month period – this is the chart of the 10 year Treasury. We saw yields collapsing in that 10-year. It touched against 1.39 for the 10-year Treasury. But the problem was, buyers kept showing up, flows kept going that way, it was a little bit of what we thought to be a warning sign. In fact, a very important chart to look at as to why we want to be more neutral and defensive in our portfolios. It has collapsed through this resistance and I feel moving forward we’re going to see much lower yields, much lower interest rates, Federal Reserve it’s important for you to come into lower rates. We’re getting less and less ammo… as you see the scale, we’re getting to the fractions because there’s not much to zero from here. So again we’re concerned, though, that it may push lower for the foreseeable future. So we want to stay positioned as we are for now. 

The next chart that we’re looking at is the financials. 

I talk about being able to have confirmation besides the S&P and the Dow Jones. Looking at the charts we want to see some other charts that really give us confirmation that these moves are real, that there’s more than just a handful of stocks like the S&P 500 – basically you have 5 stocks pulling it up the last several weeks, the big mega cap stocks, where the rest of the stocks in that index were breaking down, deteriorating from a technical standpoint. Financials is an important part to any stock market rally that is sustainable or able to move forward. In the past I had talked about this resistance, all time highs in the XLF ETF representing financials in the S&P 500. All time high back in 2008, we hit it in ‘16, pull down before the next several years sideways, and than finally joined the rally of the S&P 500. But, again hit that resistance and the S&P 500 continued to move up and financials moved sideways… no confirmation that this rally had legs to move much higher. 

We’re going to see that on a chart here. 

Here’s where we see confirmation of the S&P, in purple, XLF moving, confirming these moves up. We started seeing issues and real big issues here (past few weeks), a canary in the mine. 

Let’s look at our next chart and data we’re looking at. 

The Dow Jones Industrial one of the indexes that every night you see or hear in the news, “record high” with the S&P 500, the NASDAQ.  When the Dow Jones Industrial is making moves we want some confirmation that it is a real sustainable move. And we want to get that confirmation from the Dow Jones Transports, DJT. What is the difference? 

Well, here’s the light blue line, this is the Dow Jones Industrial, again you see that on TV every night, the dark blue line is the Dow Jones Transports. So the Dow Jones Industrial, 30 industrial companies, making a lot of goods that Americans consume and the globe consumes. So with that being said, the companies that move the goods throughout the country throughout the world should be doing similarly good. And we saw something that happened, starting back at the end of last year, we started to see a separation of those charts. We started to see that we were not getting confirmation. When I sent out the video back in January, the Dow Jones Industrial had done about 13% in the last year and the Dow Jones Transports had done 3%.

So again we were seeing a divergence that was growing and growing – red flag or a canary in the mine. Again, a big divergence was taking place here in January, a sign that not all was well for the markets to continue much higher and uninterrupted with some form of a pullback. 

Let’s look at our next piece of data we were looking at. Oil. 

Because what happened was the markets were humming along, hitting all time highs, but oil was falling off the cliff, about $10 a barrel, in that very short period of time of about a month. If the economy’s rocking and rolling, the global economy is ready to take off and help support the S&P 500 and Dow Jones companies to really help their evaluations from a fundamental standpoint and help them grow into 2020, 2021… but, oil was telling a different story. Again, it was another thing that had us concerned that we might want to be more defensive in our posture. 

Here’s another chart that we want to take a look at. 

So, back to the positions we moved to, very defensive – treasuries, municipal bonds, 10 and 20-year treasuries, and utilities – all very defensive in nature in our portfolio build. Here’s why. Inflows represented by these three here, treasuries, municipal bonds, 10 and 20-year Treasury. We saw inflows starting back here (end of January, beginning of February) into bonds, very high. We had this continuation of a rally again that had no support, no confirmation from any of the other sectors that the yields from the treasuries on the 10, 20 or 30-year, were crashing. And ultimately, here’s what has happened. Look at those treasuries and municipal bond positions up and then your S&P 500 and Dow Jones down this past week. 

So again, it was the correct move to make it that time. And again, this is just part of what we’re looking at. We also look at credit spreads and many other things that most of you would probably find boring – basically, you’d probably rather go to the dentist and have your teeth cleaned then hear about all of those other things. But this is what we eat, this is what we breathe, this is what we love to do.

I want to thank all of you for allowing me to be part of your life. If you have any questions, any concerns about what we’ve discussed and what you’re hearing, please feel free to give me a call. Because at this point, as I mentioned in the other videos, the Coronavirus was that outlier, the icing on the cake. All this data that we were looking at, that was really the thing that said hey, I don’t think it’s being factored in. I don’t think China is telling us the whole story. We don’t know where that’s going to play out at this point and that’s far from over and we don’t know how that is going to affect our projections moving forward. But, time will tell.

So, in the meantime, we will be defensive. We will be here to answer any questions – give us a call, and have a wonderful sunny Thursday afternoon.

*Charts are from Yahoo! Finance and JC Parets

The information contained herein has been derived from sources believed to be reliable, but is not guaranteed as to accuracy and does not purport to be a complete analysis of any security, company, industry, or index. This report is not to be construed as an offer to sell or a solicitation of an offer to buy or sell any security. It is not intended to provide advice tailored to your specific situation. Past performance is no guarantee of future success. The information in this report in no way attempts to provide accounting, legal or tax advice. Investment advisory services offered through Motiv8 Investments, an SEC Registered Investment Advisor.

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Market Volatility Update 8-15-2019

Brent E Chavez

Good afternoon to all. Brent Chavez with Aequitas Equitas Investment Group. I hope this finds you all doing well. I just want to get a video out to kind of give you a little bit of a breakdown of what’s been going on here for a little over a week now with the volatility in the markets and some real ugly days, just to be frank.

Well, first of all, we’ve seen some increased tension in the trade war between the United States and China. Also, we’re looking at a Brexit that may not go as smoothly as thought to happen. Again, Brexit is where the United Kingdom withdrawals out of the European Union and goes back to being on their own. And also we had the protest in Hong Kong. Then we have the biggie, the inversion of the 10 and 2 year the yield curve. We’re going to take a quick look at that.

10 and 2 year Treasury

So, this is the 10 and 2 year yield curve – what the 10 year and 2 year yields on a yearly basis. We see the green is the 2 year, the blue is the 10 year. So we see the green, and this is just today, it was a little bit more pronounced earlier in the week where the green was above the blue, so the 2 year yield was higher than the 10 year – that is considered, generally speaking, to be an indicator of a potential recession. So let’s deal with this issue first.

10 year Government Bond Yields

We’re going to take a look at what’s going on in the world as far as yields are concerned. We see a lot of negative yields of sovereign debt. Again, if you get Switzerland, money, a thousand dollars… 10 years later, you’re going to get 1.12% less back. So you’re going to pay Switzerland to hold your money. Like likewise, in Germany, right now, the Netherlands and France, in Japan, just to name a few. Again, you’re going to buy their 10 year Treasury, 30 year Treasury, whatever they’re offering, and they’re going to pay you less back over that 10 or 30 year period.

So, some people feel that these negative rates throughout the world are putting pressure on our… if we go back to that 10 to 2 year chart… we see some people feel that this is being artificially pushed to an inversion. In the past, several of the Federal Reserve Chairman, Alan Greenspan and Ben Bernanke, really preached that theory. And it led to a recession both times because they continued in the 90s with Greenspan to raise rates in light of this. Then Ben Bernanke did it in 2005, we had a yield curve and he continued to raise rates into an inverted yield curve. In both instances, we saw major recessions take place. In fact, the last seven recessions had been caused by tightening of the Federal Reserve making money, contracting the money and making it more difficult for people, businesses and individuals to get loans. So that is a potential scenario that has everybody scared – but, even in this case, where we see an inversion, historically speaking, it’s a few years down the road before we’re actually in the middle of the recession. 

This comes from a gentleman by the name of Mark Haefele, he is a Chief Investment Officer at UBS. He said this about the yield curve and inversion, “in which 10-year Treasury yields fell below 2-year ones – may not be the inevitable herald of a recession that many fear, especially if the Federal Reserve meets expectations by cutting short rates to restore the curve’s normal upward slope.” Then he further went on to say, “Neither does a yield curve inversion indicate it is time to sell equities.” He said in a blog post, “Since 1975, after an inversion in the 2-year/10-year yield curve, the S&P 500 has continued to rally for nearly two years, and has risen by 40% on average until hitting a bull market peak.” So again, even when we see this, it’s not like we’re going to, historically speaking, be in a recession next month as the stock market is reacting like we will be.

So, that’s some interesting things to think about. But again, if the Federal Reserve is sensitive to this indicator and what it has led to in the last two major recessions in our country, they will lower those short term rates and get this yield curve back to its normal slope.

Also, a gentleman by the name of Tony Dwyer, he is a Chief Market Strategist a Macroeconomist with Canaccord Genuity, had this to say about the situation that we have here in our economy, he says about his projections moving forward, he says, “Although we continue to believe more time is needed to complete the current correction, our still-positive core fundamental thesis continues to suggest any weakness should prove limited and temporary and provide a more attractive entry point for a move toward our 2020 target of 3,350 [on the S&P 500].” So, the S&P 500 today is sitting at 2826, at the time of our video. Again, he’s projecting a target of 3350 for next year.

So, I think that we need to look at the data – you as an individual will have to be aware of what is causing this. And if you feel comfortable, or you have more questions about what’s taking place, call me so we can individually talk about your individual situation and what we may or may not want to do with your portfolio.

But it is something that I’d like all my clients to know is that we are seeing this downward turn in our interest rate environment. So, that is something that if you would like to talk to me about maybe locking in at some of the rates that we see in the marketplace, give me a call because I feel that going forward those interest rates are going to be lower than they are now on a fixed rate of return. So give me a call.

Kelsey will be sending out an email with the rates that we have available at this time. Again, subject to change at any moment and most likely will be lower especially, if as expected, the Federal Reserve does lower the rates one more time.. we will see rates going down with any type of fixed rate of return, whether it’s a CD or a fixed rate annuity. 

Take care. If you have any questions feel free as always to reach out and we will talk. Bye bye.

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Market Update 8-7-2019

Brent E Chavez

Good afternoon to all. Brent Chavez with Aequitas Equitas Investment Group. I wanted to get this video out to all of you to follow up to an email that I had sent out yesterday. We’ve had some rough markets here over the last week or so and it has many people concerned about what’s going on.

As we look at the S&P 500, it’s been 18 months of highs and lows. This is back in January of 2018. And then again, we had a September and October, high rally that year. Then, we had an ugly pullback in December of last year. We found ourselves doing well in Spring. A pullback again towards the end of May. Then we had, as of July 26th, an all time high in the S&P 500. And then we see this pull back from that high in the markets, being a little bit unnerving when you have your money invested in them.

So we want to talk a little bit about what set off this pullback, this turbulence, this time. It started last week Federal Reserve Chairman Powell came out hawkish in his tone – what do we mean hawkish? Well, he was a little more aggressive in his stance on not lowering interest rates quite as fast as the market had wanted or had anticipated. So that kind of started a little bit of the grumbling within the market last week. Then Friday the US had announced an additional tariff on $300 billion of Chinese goods. And then the People’s Republic of China responded on Monday, by devaluing their currency, lowering the value of their dollar. Many people may think, why would a government want to do that? Well, it makes their products that they are trying to export out of the country cheaper and it makes goods that are coming into the country more expensive. And so they are trying to offset some of the tariff taxes against their goods coming into the US, but it really just set off a firestorm between the US and China on Monday. So, we saw that very ugly day down about 3%, which was the worst trading day in all of 2019. We know we’ve had some rough times here, but that actually was the worst trading day for the year.

So, what should we do from here. Making rash decisions is usually very expensive… panic, usually costs money. We don’t want to panic. All of you have had individual portfolios built to meet your risk number. If you have any questions or concerns or you’re overly concerned about what’s going on, give me a call so that we can meet and look at your portfolio, look at your risk tolerances and make sure you still feel comfortable with them.

But what’s the good news that most people are missing? Well, we want to remember we are at record low unemployment rates in the US. If you want a job, you can have a job. In fact, if you want two jobs, you can have two jobs right now. Probably could have three if you want to – there’s so much work out there. So, that’s always a positive.

Also something else was very interesting. So far this quarter, the S&P 500 earnings reports have come in – 76% of those companies in 388 companies of the 500 companies have reported so far for the second quarter – 76% of them have beat their earnings projections or their earnings guidance. In fact, some of the companies have beat it by thousands of percent. That 76% beat is actually above the five year average when it comes to the earnings reported by the companies in the S&P 500. So, again positive news.
Autos are another area we’re still seeing resiliency and strength in the economy. Year-to-date there’s been close to 5.5 million new car units moved in the United States. Again, that is just slightly less than last year at this same time – about 57,000 new autos less than what’s being sold here today.

So again, nothing’s falling off the edge of the cliff causing too much concern. Our job here at Aequitas Equitas Investment Group is to keep our eye on the data, keep an eye on your portfolios. We want to assure you, we’re working hard. If you have any questions or concerns, please give us a call. We look forward to speaking with all of you very soon. Take care.

brent@aeinvestmentsgroup.com
(215) 766-7002

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Market Update 6-6-2019

Brent E Chavez

Market Update 6-6-2019

We find ourselves in what has been a pretty volatile six week period. We go back six weeks, we saw indexes hitting up against all time highs with a lot of positive news and hope that the economic growth would continue.

So, what happened?

The three T’s, the triple threat. This is what everybody’s worried about: tariffs with China, tweets from the president of the United States and threats, threats of additional tariffs on countries like Mexico. It has unnerved the markets. It has brought concern about a slowing of the economy due to these tariffs that are here, domestically, but also abroad across the globe.

So, we want to remember though, that we don’t want to overreact to these seemingly never-ending issues that we see in the market. But, we want to stay the course, be level-headed, and remember that the economy still doing quite well.

We saw that in the very strong consumer price index at the end of May. The consumers were at a six month high for confidence in the economy, which no doubt was reflected in the best month of auto sales we’ve had year-to-date in May. We have the jobs number coming out on Friday. So we’ll get a little bit more insight on what’s happening in the labor force… not that that’s a leading indicator, but it does help us see how manufacturing and employers feel about hiring new employees. So, we’ll look forward to see what that number has to say, and what does that indicate for the condition of our economy.

But, in the meantime, remember, we don’t want to make rash decisions based on the negative news that we see constantly on the business channels. Remember that we’re looking at the data… it’s all we want to pay attention to. Looking forward, if we can get past these issues with the tariffs, I feel very strongly that this economy has quite a way to go as far as being able to expand before we see a recession. But again, time will tell. There’s no crystal balls here.

If you have any further questions or concerns about what’s happening. Feel free as always to reach out to me at the office, and I look forward to speaking with all of you and seeing all of you very soon. Take care.

bchavez@aeinvestmentsgroup.com
(215) 766-7002

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Market Update 5-10-2019

Brent E Chavez

Video Transcript:

Good afternoon. Brent Chavez with Aequitas Equitas Investment Group working hard this Friday afternoon to level the playing field for all of our valuable clients.

I want to introduce my latest addition to my family, Magnus. He is an 11 week old Doberman. And when you come into my office you will get to meet him up close and personal on your next visit.

Just wanted to briefly talk about the markets since we’ve had a volatile week and we haven’t had this type of volatility since the end of 2018. The recent market draw down of almost 5% has been caused by tariff scares, the US and China walking into a trade war.

Last night President Trump enacted an additional $200 million in taxes with tariffs on goods coming into America from China, again, so we see continued Friday morning sell off of the markets. And as of 2:30pm, we have seen a rebounding up towards neutral, as we go we don’t know how markets will end today, but in any event, this too shall pass.

In many of our videos at the end of 18 we talked about the data not supporting the large sell off that took place starting in September through Christmas Eve. Data did not suggest that we should be selling off like this. And we had repeatedly recommended staying calm, staying in the markets and that was the right thing to do. As we quickly saw a rebound touching back up to these highs that we reached twice before, but now we see again about a 5% pullback in the markets as we stand here Friday afternoon.

You probably won’t get this video to Monday, because it has to go through our compliance department, and you will receive it on Monday at some point. But in the meantime, we want to keep things in perspective not get overly concerned that this is going to lead into some full fledged war between China and US.

Some things we want to remember is that being in the markets first and foremost is always difficult. There’s always issues that are facing people who have their money invested into the market, whether it’s Brexit, Grexit, North Korea, financial scares within the system itself, to terrorism. There’s always going to be various issues that are going to cause people to be scared in the market, making it very difficult in periods of time to stay in the market. But we know from here to here, that has been the place to be for the last three, five and ten year period.. the greatest opportunity was found being in the markets.

So, with that being said, the realization is that both of these countries, for the benefit of both sides, need to come to some sort of agreement. Trade talks could end today, Friday, very badly with no agreement, but again, those trade talks can be started anytime moving forward.

We have a presidential election in 18 months here in the United States, so I know that the President Trump does not want this to drag out longer than it has to. What does China, what is their interest? Well they have the largest population in the world by far as we look at the breakup of the demographics around the world. China is the largest country followed by India. So they have billions of people that they need to keep employed and continue to grow their economy.

The US, what do we have at stake? We have what is the largest economy in the world. About 21 and a half trillion dollars in GDP is going to happen in 2019. So we have, the United States, the largest economy by far. China has is about $7 trillion behind the GDP, with a much larger population.

So we have the US and its GDP, its ability to produce, we have China, largest population of the world… it’s in the best interest of both parties to come to an agreement and we feel that ultimately that’s what will happen, but we may have some more rough times in between.

So I just want to get this out to you and assure everybody we’re here working hard staying on top of it, the data that’s coming in, looking at all possibilities of outcomes. And we will always keep you informed and I’d like to thank all of you who are my clients. Have a wonderful weekend. If you have any concerns that you want to talk to me more in depth about, feel free to give me a call at the office. Again, have a wonderful weekend. Bye bye.

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Images Used in Video:

– World Population Percentage

 

 

 

 

 

 

 

 

 

 

 

 

 

– World’s Biggest Economies for 2019 and 2020

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