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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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Should You Care What the Financial Markets Do Each Day?

Brent E Chavez

Should You Care What the Financial Markets Do Each Day?

Focusing on Your Strategy During Turbulent Times.

Investors are people, and people are often impatient. No one likes to wait in line or wait longer than they have to for something, especially today when so much is just a click or two away.

This impatience also manifests itself in the financial markets. When stocks slip, for example, some investors grow uneasy. Their impulse is to sell, get out, and get back in later. If they give in to that impulse, they may effectively pay a price.

Across the 30 years ended December 31, 2018, the Standard & Poor’s 500 posted averaged annual return of 10.0%. During the same period, the average mutual fund stock investor realized a yearly return of just 4.1%. Why the difference? It could partly stem from impatience.1

It’s important to remember that past performance does not guarantee future results. The return and principal value of stock prices will fluctuate over time as market conditions change. And shares, when sold, may be worth more or less than their original cost.

Investors can worry too much. In the long run, an investor who glances at a portfolio once per quarter may end up making more progress toward his or her goals than one who anxiously pores over financial websites each day.

Too many investors make quick, emotional moves when the market dips. Logic may go out the window when this happens, in addition to perspective.

Some long-term investors keep focus. Warren Buffett does. He has famously said that an investor should, “buy into a company because you want to own it, not because you want the stock to go up.2 

Buffett often tries to invest in companies whose shares may perform well in both up and down markets. He also has famously stated, “If you aren’t willing to own a stock for ten years, don’t even think about owning it for ten minutes.”2

In contrast with Buffett’s patient long-term approach, investors who care too much about day-to-day market behavior may practice market timing, which is as much hope as strategy. 

To make market timing work, an investor has to be right twice. The goal is to sell high, take profits, and buy back in just as the market begins to rally off a bottom. But there is volatility in financial markets and the sale at any point could result in a gain or loss.

Even Wall Street professionals have a hard time predicting market tops and bottoms. Retail investors are notorious for buying high and selling low. 

Investors who alter their strategy in response to the headlines may end up changing it again after further headlines. While they may expect to be on top of things by doing this, their returns may suffer from their emotional and impatient responses.

Nobel Laureate economist Gene Fama once commented: “Your money is like soap. The more you handle it, the less you’ll have.” Wisdom that may benefit your strategy, especially during periods of market volatililty.3

How have your investments performed through these turbulent times?

Questions? Please do not hesitate to contact us: info@aeinvestmentsgroup.com, (215) 766-7002

Citations
1 – nytimes.com/2019/07/26/your-money/stock-bond-investing.html [7/26/19]
2 – fool.com/investing/best-warren-buffett-quotes.aspx [8/30/19]
3 – suredividend.com/best-investment-quotes/ [12/5/18]

Mutual funds are sold only by prospectus. Please consider the charges, risks, expenses and investment objectives carefully before investing. A prospectus containing this and other information about the investment company can be obtained from your financial professional. Read it carefully before you invest or send money.

This material was prepared by MarketingPro, Inc., and does not necessarily represent the views of the presenting party, nor their affiliates. This information has been derived from sources believed to be accurate. Please note – investing involves risk, and past performance is no guarantee of future results. The publisher is not engaged in rendering legal, accounting or other professional services. If assistance is needed, the reader is advised to engage the services of a competent professional. This information should not be construed as investment, tax or legal advice and may not be relied on for the purpose of avoiding any Federal tax penalty. This is neither a solicitation nor recommendation to purchase or sell any investment or insurance product or service, and should not be relied upon as such. All indices are unmanaged and are not illustrative of any particular investment.

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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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