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WOMACK WEEKLY COMMENTARY Renew. Regenerate. Refocus.
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February 12, 2018
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THE MARKETS
Back to
reality...
After months
of eerie calm, stock market volatility has returned. The CBOE Volatility
Index (VIX) – a measure of how turbulent investors expect stock markets to be
during the next 30 days – appeared to fall asleep in November 2016. For more
than a year, a level of serenity that is rarely associated with stock markets
prevailed and U.S. share prices moved steadily higher.
It appears
that time is behind us. Barron’s wrote:
“With
February’s swift stock market correction, volatility has arrived and will probably
stay awhile. The downturn last week ended a streak of 404 trading days
without a 5 percent drop in stock prices from the previous high – the longest
such streak in market history.
The last
correction came in February 2016, when stocks dropped 15 percent. Investors
then fretted that Chinese economic growth might be slowing, which turned out
to be a false alarm. Long term, the latest nose dive might yet become just a
bull speed bump, but there’s already been plenty of pain.”
So, is this a
speed bump or is it the beginning of a bear market? A bear market, generally,
is a decline of 20 percent or more, and it is normally accompanied by a
recession, which is a significant decline in economic activity.
In general,
financial firms and publications do not anticipate a recession in 2018, but
forecasting recessions can be challenging.
No matter what
happens, the key is keeping your head. At times like these, emotion grabs
investors by the throat, and it can be difficult to recall markets and
economies tend to move in cycles. Historically, bull markets lead to bear
markets, which lead to bull markets. Likewise, economic expansions are
followed by contractions (recessions), which are followed by expansions.
U.S. stock
markets rallied on Friday, but the Standard & Poor’s 500 Index, Dow Jones
Industrial Index, and NASDAQ all finished the week more than 5 percent lower.
S&P
500, Dow Jones Global ex-US, Gold, Bloomberg Commodity Index returns exclude
reinvested dividends (gold does not pay a dividend) and the three-, five-,
and 10-year returns are annualized; the DJ Equity All REIT Total Return Index
does include reinvested dividends and the three-, five-, and 10-year returns
are annualized; and the 10-year Treasury Note is simply the yield at the
close of the day on each of the historical time periods.
Sources: Yahoo! Finance, Barron’s, djindexes.com, London Bullion Market Association. Past performance is no guarantee of future results. Indices are unmanaged and cannot be invested into directly. N/A means not applicable.
MARKET DOWNTURNS ARE NOT A DESTINATION. Markets and economies are cyclical. For instance,
from 1945 through 2009 (the start of the current expansion), the United
States experienced 11 economic cycles. The average recession lasted for about
11 months and the average expansion persisted for about 58 months, reported
the National Bureau for Economic Research.
After the
recent market decline, many people are concerned the bull market may have run
its course, and a bear market may be ahead. Since bear markets usually mark
the beginning of recessions, let’s take a look at what some leading financial
companies and publications have to say about their expectations for 2018:
“The U.S.
expansion is on course to become the longest on record, stirring concerns it
is about to run out of steam. But is it? The recently enacted tax overhaul
and higher federal spending could add 0.8 percentage point to U.S. GDP [gross
domestic product] growth in 2018, we estimate. This could tip the balance
toward accelerating growth. Such a boost could shorten the cycle’s expiration
date to two or three years.”
--BlackRock Investment Institute, February 7, 2018
“Most analysts
think that while profits are growing and the economy is healthy, the stock
market will be supported. But there is scope for a lot more choppiness as
investors await the Federal Reserve’s rate decisions and look for data to
indicate whether inflationary pressures are rising.”
--The Economist, February 8, 2018
“Perhaps the
over-arching risk is complacency. While the current conjuncture might appear
to be a sweet spot for the global economy, prudent policymakers must look
beyond the near term…The next recession may be closer than we think, and the
ammunition with which to combat it is much more limited than a decade ago,
notably because public debts are so much higher.”
--IMF Blog, January 22, 2018
“While we
expect volatility will be higher this year than in 2017, with company
fundamentals looking solid and synchronized global economic growth set to
continue, it seems reasonable to expect that stocks will move higher over the
coming year.”
--J.P. Morgan Asset Management, February 5, 2018
“An
overheating global economy could mean a more rapid shift by central banks to
rein in stimulus, often a precursor to recession. Yet, we still believe a
recession is not on the near-term horizon.”
Forecasting is a difficult task. Time will
tell.--Schwab market commentary, February 9, 2018 Weekly Focus - Think About It
“Stock market goes up or
down, and you can't adjust your portfolio based on the whims of the market,
so you have to have a strategy in a position and stay true to that strategy
and not pay attention to noise that could surround any particular
investment.”
--John Paulson, Investment manager Best regards, Womack Investment Advisers, Inc.
WOMACK
INVESTMENT ADVISERS, INC.
Oklahoma / Main Office: 1366 E. 15th Street - Edmond, OK 73013 California Office: 4660 La Jolla Village Dr., Ste. 500 - San Diego, CA 92122 Phone (405) 340-1717 - Toll Free (877) 340-1717 Website: www.womackadvisers.com Are you prepared for the eventual market volatility?
Be prepared and have a plan. Watch our
new video above on successful investing, and receive a free report on how
much risk you should be taking.
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will ask for their permission to be added.Womack Investment Advisers, Inc. (WIA) is a registered investment adviser whose principal office is located in Oklahoma. Womack Investment Advisers, Inc. is also registered in the State of California, the State of Illinois, the State of Indiana, and the State of Texas. WIA only transacts business in states where it is properly registered, or excluded, or exempted from registration requirements.
*
These views are those of Carson Group Coaching, and not the presenting
Representative or the Representative’s Broker/Dealer, and should not be
construed as investment advice.
* This newsletter was prepared by Carson Group Coaching. Carson Group Coaching is not affiliated with the named broker/dealer. * Government bonds and Treasury Bills are guaranteed by the U.S. government as to the timely payment of principal and interest and, if held to maturity, offer a fixed rate of return and fixed principal value. However, the value of fund shares is not guaranteed and will fluctuate. * Corporate bonds are considered higher risk than government bonds but normally offer a higher yield and are subject to market, interest rate and credit risk as well as additional risks based on the quality of issuer coupon rate, price, yield, maturity, and redemption features. * The Standard & Poor's 500 (S&P 500) is an unmanaged group of securities considered to be representative of the stock market in general. You cannot invest directly in this index. * All indexes referenced are unmanaged. Unmanaged index returns do not reflect fees, expenses, or sales charges. Index performance is not indicative of the performance of any investment. * The Dow Jones Global ex-U.S. Index covers approximately 95% of the market capitalization of the 45 developed and emerging countries included in the Index. * The 10-year Treasury Note represents debt owed by the United States Treasury to the public. Since the U.S. Government is seen as a risk-free borrower, investors use the 10-year Treasury Note as a benchmark for the long-term bond market. * Gold represents the afternoon gold price as reported by the London Bullion Market Association. The gold price is set twice daily by the London Gold Fixing Company at 10:30 and 15:00 and is expressed in U.S. dollars per fine troy ounce. * The Bloomberg Commodity Index is designed to be a highly liquid and diversified benchmark for the commodity futures market. The Index is composed of futures contracts on 19 physical commodities and was launched on July 14, 1998. * The DJ Equity All REIT Total Return Index measures the total return performance of the equity subcategory of the Real Estate Investment Trust (REIT) industry as calculated by Dow Jones. * Yahoo! Finance is the source for any reference to the performance of an index between two specific periods. * Opinions expressed are subject to change without notice and are not intended as investment advice or to predict future performance. * Economic forecasts set forth may not develop as predicted and there can be no guarantee that strategies promoted will be successful. * Past performance does not guarantee future results. Investing involves risk, including loss of principal. * You cannot invest directly in an index. * Stock investing involves risk including loss of principal. * Consult your financial professional before making any investment decision. * To unsubscribe from the Womack Weekly Commentary please reply to this email with “Unsubscribe” in the subject line, or write us at megan@womackadvisers.com. |
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