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Just What You Need To Know Right Now

            Last week was a hard down week for global stocks.  You’re anxious.  Here’s what you need to understand right now.

Just the Facts

  • The US economy is in great shape with no recession in sight within 7-9 months – discussed last week.
  • Earnings thus far are coming in stronger than even recently raised analyst expectations (Top line and bottom line)
  • Earnings guidance is strongly higher for the third quarter in a row
  • Inflation is starting to build in the economy.  Inflation is good for stocks from these levels.
  • This feels like a train wreck only because we have not seen any price corrections of any magnitude in over 300 days (a record).  Normal market conditions see 7-8 corrections of 3% every year on average and 2-3 corrections of 10% or more every year on average.
  • Price declines in the short term (next 2-3 weeks) are not likely done yet.  We are expecting approximately a total 6-7% market decline before we see another good buying opportunity.
  • Stocks should continue to trend higher into the spring and early summer.    This looks like a technical correction within a longer-term uptrend.  Buy the dips but be patient and wait for selling to end.
  • There will be a short-term bounce in prices this week but we are likely to see lower lows before this intermediate term correction is done. 
  • We have been adjusting our market exposure and raising cash since mid-January.  We are sitting on 24-41% cash across all strategies.  The Income models are 60% in cash.  That’s the right amount of exposure for current market conditions.
  • Financial markets will move strongly in both directions without your understanding why.  Stop looking for reasons because once you think you have found the answer, the market will defy your newfound logic.  Follow the trends.
  • The trend in stocks is UP!
  • If you are not a current client of ASFA, lost in the storm, nervous and have no idea what to do with your investments right now, please read the “Light House Project” offer in this update.  We’re here to help you.

…..You’re Welcome

Your “just keepin' it real” Investment Advisor

Sam Jones