As 2018 comes to a close, we are all anxious to see if the so-called Santa Rally shows itself. Will the market continue its downward trend into the new year, or will news from the Federal Reserve meeting send stocks upward?
Hello, this is Ron Rough, Director of Portfolio Management for Financial Services Advisory with a video market update.
For the past two months, the market has bounced around in a six percent trading range up and down. If you look on this chart, you can see that this lower band here was an excellent exit point for our triggers. This red arrow points out over the past couple of days, we broke that support.
So now stocks have broken out of the support that we’ve been in for the past two months, and we have taken the portfolios essentially to cash. Not quite 100%, but pretty close.
This next chart here will show you exactly where the different strategies are. Tactical [Growth], Core Equity, and Conservative Growth all have 20% in stock-oriented funds. But they also have 10% in an inverse fund, which moves opposite what the market is doing. So their net invested position is actually only 10%. I would say in the case of Core Equity and Conservative Growth, even less than 10%. We still do have bonds in the portfolio and we still have gold in some of the portfolios, but these are the most defensive the portfolios have been since 2011.
As to where things might go from here, what would get us back into the market? If I go back to this chart, we’re going to want to see stocks recover from these low levels and begin to move back up into this range here before we would probably do anything. And frankly, until the market was able to break above this resistance area here, that’s what it would take to get the portfolio’s back essentially to fully invested.
The Fed just met today and decided to bump up short-term interest rates. Who knows how the market will react in the days after this meeting. If the market continues lower, the portfolios are very protected. If the market recovers by some chance, then eventually we’ll start to leg back into the into the equity market. But that’s something you probably wouldn’t see until next year.
So until then, thanks for listening!
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