Money-n-Retirement

Back in 1965, Martha and the Vandellas sang “Nowhere to run, baby, nowhere to hide”. 

That was true as well in 2018, at least in the world of investing.  The graphic below, from visualcapitalist.com, shows just how tough the investing environment of 2018 was. 

Bonds were flat, the US dollar was modestly higher…and that was it.  Non-US stocks fared much worse than US stocks, and the near-universal prediction that Emerging Markets would be the best bet for 2018 was a complete bust as Emerging Markets were the worst of worldwide equity indexes.

December has been turbulent for the market. Declines like we have recently witnessed are beyond usual as shown in the graph below. If this in fact is the beginning of a new bear market, we’re off to a rip-roaring start.

• As of Tuesday, 10 of 14 market days in December were down days for the Dow, which isn’t a first – but seven of those ten were down -350 points or more.  Here’s a listing – from best to worst days.  (Source: Yahoo! Finance.)
  • 157.03 (12/12)
  • 82.66 (12/18)
  • 70.11 (12/13)
  • 34.31 (12/10)
  • -53.02 (12/11)
  • -79.40 (12/6)     
  • -351.98 (12/19)
  • -414.23 (12/21)
  • -464.06 (12/20)
  • -496.87 (12/14)
  • -507.53 (12/17)
  • -558.72 (12/7)
  • -653.17 (12/24) -799.36 (12/4)

Since September, the market is on a roller coaster and many wonder what role the government shutdown is having in all of this. The chart below is an interesting study of previous shutdowns, and as you can see, they have not had a big or consistent negative effect on the market.

Especially after suffering their worst week since 2008, pretty much everyone knows that stocks are struggling of late.  But with each of the major indexes falling into bear market territory, many are probably unaware of just how swiftly and severely individual stocks have been hit.  Many of Wall Street’s recent favorites are down a ton, with the popular “FAANG” stocks (Facebook, Amazon, Apple, Netflix, and Google) down anywhere from 20% to 40%.  Research firm FactSet created the following graphic, showing just how bad the carnage has been – and keep in mind that the losses are through the 20^th, and don’t include the further damage done on Friday the 21^st:

As the major market indexes have fallen of late, one after another has experienced what’s known as a “Death Cross”, a technical market pattern that occurs when an index’s 50-day moving average crosses below its 200-day moving average.  Its dreadful name would suggest that every investor in the world should run for the hills whenever one occurs—but is that the prudent thing to do?  Mark Hulbert, financial columnist at Marketwatch, decided to take a look.  Going back to 1970, Hulbert found that the Dow Jones Industrial Average has endured 34 “Death Crosses”, followed eventually by the opposite, the so-called “Golden Cross” when the 50-day moving average crosses back above the 200-day moving average.  His study showed that on average, the market has actually performed somewhat better following Death Crosses than it has following Golden Crosses over the following month, quarter and 6 month periods!  As he notes, this is exactly the opposite of what market folklore would lead us to believe.

Disclaimer: The information in this post is not a recommendation to buy or sell securities. Investment decisions should not be made upon a single chart or graph. You should consult a qualified investment advisor before making an investment decision.

Investor anxiety is running high.  CNN’s Fear & Greed Index has swung from a reading of 70 indicating “Greed” down to just 7 indicating “Extreme Fear” in the span of just one month.

Market blogger and Chartered Market Technician Ryan Detrick looked for other instances of similar market turmoil in previous Octobers.  Detrick found that since 1950 there have been 7 other years that were positive year-to-date going into October and saw the S&P 500 turn negative year-to-date during the month.  “The good news”, he writes, “is the final two months were higher 6 times and up 4.1% on average.”

Disclaimer: This writing is for informational purposes only and does not constitute an offer to sell, a solicitation to buy, or a recommendation regarding any securities transaction, or as an offer to provide advisory or other services by Capital Retirement Planning, LLC in any jurisdiction in which such offer, solicitation, purchase or sale would be unlawful under the securities laws of such jurisdiction. The information contained in this writing should not be construed as financial or investment advice on any subject matter. Capital Retirement Planning, LLC expressly disclaims all liability in respect to actions taken based on any or all of the information on this writing. You should seek the advice of a qualified investment professional before making an investment decision.

Legendary investor Warren Buffett’s favorite metric of stock valuations is currently suggesting that a stock market setback could be coming.  While anything from Buffett brings up memories of the television commercials from the 1970’s that with the tag line “When E.F. Hutton talks, people listen”, Buffett’s favorite indicator is both historically effective and remarkably simple to calculate.  The indicator is simply the ratio of the total market capitalization of all U.S. stocks divided by the latest Gross Domestic Product (GDP) reading.  Of concern is that the current value of this ratio has never been higher.  While no indicator is correct 100% of the time, the Buffett indicator is remarkably accurate.  As a general rule, if the indicator falls below 80-90%, it has historically signaled that stocks are cheap.  Likewise, levels significantly higher than 100% can indicate stocks are too expensive.  For example, the Buffett indicator peaked at 145% right before the dot.com bubble burst, and reached 110% before the financial crisis.  Where does it stand now?  149%. (Chart from motleyfool.com)