Yes, this is the notice you’ve been waiting for.This is that all-important time zone when we should add some new money to our investment accounts if you have the means or need to do so before year end. This Calling All Cars is a tentative suggestion with considerations for different types of investors and larger cycle implications. Please read this update thoroughly and feel free to call us with questions or clarifications about your specific situations.
For Investors Approaching or In Retirement
Honestly, adding a lot of new sideline cash to investment accounts is probably not realistic or recommended at this stage of your life. This is especially true if you’re already making monthly withdrawals against your investment balance. If you happen to have significant cash and want to get that money to work, you should consider an investment strategy focused on income (like our Retirement or Freeway High Income) strategies. There are still opportunities in Income if one knows where to look and what to avoid more importantly. Gains from here will still be muted in income strategies but the next big move in 2019 will very profitable, especially if high yield corporate bonds continue to re- price at the current pace.
All Other Investors with a Time Horizon Longer than 5 years
This is a time zone when you should consider making your 2018 annual contributions. Today, our firm made all 2018 employee profit sharing contributions for instance because we need to get it done before year end. These contributions went into the money market account and will wait for clear entry points to buy into specific investments. The same would hold true for education accounts (like 529s) where funding must happen before the end of the calendar year. Now is a reasonable time to put new money to work, however we have had almost no signs that a “durable” low is in place, even in the short term. So, if we had to really fine tune the advice, it would be this; Get your money into your accounts, put it in cash or money markets, and wait for more signs that sellers are exhausted. Today was the first sign of actual buying we have seen in the month of October, which was historically one of the worst months for stocks in the last two decades. That is a fact. But rarely is it a good idea to buy the first up day. We would love to see more back and forth action at these levels to make sure prices aren’t going to waterfall lower. Elections are looming and that event might be the catalyst for a relief rally that is just days away. The market hates uncertainly so it probably doesn’t really matter which camp takes or retakes control of Congress, just that the event is over.
Bear Market
This is important for everyone to understand. In November of 2007, we issued a similar Calling All Cars after a very rough October, just like today. That particular low was a good one… for about 30 days. 2008 ushered in a continuation of the bear market that had begun in the fall of 2007 and prices fell much further. We view this “buy” as nothing more than a short term low within a longer term downtrend.Long term moving averages are now sloping down which defines the market trend. The trend is down! The environment has changed and it is not investor friendly. So any advice to add new money must come with a strong caveat that this level is not likely to be the lowest you will see in the next 24-36 months. If you believe in adding money at market lows and buying discounts all the way down into a deeper bear market cycle, that’s not a bad strategy but you have to stick with it. If that’s not tolerable for you, then wait. Many of us have annual tax issues and education funding mandates making this a reasonably good opportunity to deploy new cash for this calendar year. Take it with a large grain of salt.
Call if you need help – The Lighthouse is on!
Regards,
Sam Jones
