As many of my readers know, I was in the financial field for over 30 years. As a stockbroker I’d witnessed Bull markets and Bear markets many times during those years. For half of my career, I was also a Registered Investment Advisor, charging my clients an annual fee (2 %) instead of commissions to manage their investment portfolios. I had the privilege of working with thousands of investors over the years and managed many millions of dollars.
As I look back over my career, I remember a client, an engineer actually, who allowed me to manage both his investment accounts as well as his wife’s. Since they kept their accounts separately, they would receive separate statements from the Mutual Fund companies where there money was being held. After a few years my client, we’ll call him Mr. Smith, decided that he would save money and have me only manage his wife’s money. He would take care of his own. My method of managing money was then, as my market updates and advice is today, to take small losses if needed, to avoid large losses while taking advantage of market up - trends. Each time a move was made in the account, a statement would be generated and the client would receive that statement 7 – 10 days later depending on the mail.
My practice was to personally review my client’s account with them semi-annually and annually as well, and as I discovered (and fairly certain was happening) when reviewing theirs, that Mr. Smith was ‘following’ my market moves and adjusting his personal accounts after receiving his wife’s statements! Now please understand that although it was a bit disrespectful, it didn’t really bother me. Mr. Smith quickly ascertained that he didn’t do quite as well as his wife had. Why?
But further – why am I relating this story now………?
Last week our subscribers to GaneWisdom/Market Edge were advised that, based on our analysis, our position became bullish. Meaning it would be wise to consider moving from Money Markets (Cash) into certain sectors of the market. At that time!! I mention this because, as readers of our website know, we post ALL of our previous posts which allows insight into our performance over a period of time. To make moves a few days, or a week after our posting could lead to buying at a higher price then we had recommended thereby possibly negating any significant gains and the heightened possibility of a serious loss! This is not to imply that the current market conditions (at the time a non-subscriber views these past posts) are not as favorable, but there is a better than average chance that they are indeed, not! Please use good judgement before you make any decisions based on our analysis but especially our past analysis.
This past week saw a significant testing of market strength. As we know 2022 was not a good year for the markets and at this point any good news, any positive indicators are given more importance than perhaps even common sense would dictate. As we continually point out – most investors trade (or not) on emotions – something we at GaneWisdom/Market Edge decidedly do not. The S&P 500 had a tuff day this past Wednesday as did the general market however by weeks end the markets remained basically unchanged for the week from where they began on Monday January 16th. The S&P 500 was down fractionally by 0.66 % but the Nasdaq 100 saw an increase of nearly ¾ %.
This week the S&P 500 closed above its 200 - day and 50 - day moving averages which is a strong bullish signal. We may even see the 50 - day moving average moving above the 200 day and that would be a confirmation of this current bull rally.
The Small Cap sector has seen a rally as well gaining 5.3 % for the week. It is currently above its 50 – day and 200 – day moving average.
Although our numbers, indicators and analysis continue to proclaim, if not confirm, that we are still currently in a Bear Market, investors seem to be shrugging their shoulders. This is in itself very disconcerting. Why? Because if this analysis is accurate, the fallout will be massive and malevolent if (or when) this Panic Bottom we keep referring to, does happen. The number we consistently gauge as a Panic Bottom is the S&P 500 at 3,300 +/-. A Panic Bottom occurs when investors cannot take any more volatility and just throw in the towel.
The VIX – the Volatility Index that we’ve referred to in the past (also known as the Fear Index) is showing very little concern from the majority of the investing public at present. What this means is that these folks are not taking any precautions by using diversity in their portfolios and seem to be (AKA confirming to us) that emotional trading and decisions are taking place.
The technology sector is witnessing major layoffs with Microsoft laying off @10,000 workers while Google is giving notice to 12,000 workers. In just the first three weeks of the new year, we have seen the global technology sector lay off 55,000 workers!
Please keep in mind that although inflation is slowly easing, we are currently at an adjusted rate of 6.5 %, well above the Federal Reserve’s stated goal of 2 %. There will be more interest rate hikes but as we’ve seen, investors are counting on slower future hikes. Assuming this will in fact happen is very dangerous.
Existing home sales in the United States have fallen for the 11th straight month in December which is a record drop year-over-year drop of 34 % ! That folks is worse than the worst drop during the Great Financial Crises! Additionally, last month building permits fell 1.6 % from November. When this happens it usually a signal that high mortgage rates as well as higher inflation has taken root in the overall economy. How this plays out for the 1st quarter and any strength going into the 2nd remains to be seen.
Although very easy to ignore, the national debt will become a very – discussed topic in the national media within a few weeks. Thursday, January 19th, 2023 the United States technically ran out of money. As you’ve probably heard, the current debt of the US stands at $31.4 Trillion dollars. Some background is in order here…..
The total debt of the nation has been accumulating since the 1700s, shortly after the colonies became a Bona fide nation. The public began to really take notice of this however during World War1 when Congress wanted to issue war bonds to pay for the war effort. Having a ‘debt limit’ was a device to promote these bonds. It was raised again in 1939 prior to America’s entry into the Second World War and since 1960 the debt limit has been raised 78 times! The debt of a country, the US in our case, is used to pay obligations of the government – military pay, Social Security, Medicare, Medicaid and other entitlement programs. This is just payroll by the way. This is paying on past debts. There are also purchases and contract work that the government is responsible for as well. Instead of imparting an economics class here, lets put into practical terms how it could (will) affect us as citizens if the debt ceiling is not raised: Recession will become fact. Until now, a recession appears likely but should the government renege on its debt (this is past debt as we’ve pointed out above) it will not only become fact but will become very, very ugly very, very quickly. Tax refunds will not go out. The stock and bond markets will quickly go into panic more. Taxes will be increased and the once-revered US Dollar – which until now is the world’s strongest currency – will no longer be. You’ve no doubt heard the term ‘Backed by the full faith and credit” of the United States. This of course will no longer be the gold standard of the world.
This brief explanation of the Debt Ceiling is meant to encourage investors to become, or continue to be, vigilant of the intricacies of their investments. To close your eyes and hope for the best is NOT a prudent stewardship of your money. Especially when there are alternatives available. GaneWisdom/Market Edge will continue to be alert and watchful to events affecting the market and economy and can be a useful medium in which to help you make prudent decisions in managing your money.
We are now entering unknown and uncharted waters. The market is showing strength where broad indicators are pointing the opposite. Although we are NOT market – timers, timing is going to be crucial when it comes to managing your money in a cautious and discerning way. Knowing when to be in the market is going to be as important as where to be. The majority of our subscribers use our analysis to help them manage their 401Ks, 403Bs, IRAs and various retirement accounts. This is a responsibility that we at GaneWisdom/Market Edge take very seriously. We will continue to provide our analysis by always basing them on our comprehensive examinations of relevant factors governing the markets and economic conditions and to fulfil that mission with clarity, prudence and wisdom.
As we’ve written, our position is bullish with an eye out for short – term potential profits while still believing that this is but another Bear Market rally.
Our current position for the week of January 23rd, 2023, is Bullish – meaning invested. Please consider diversification. Our advice is to not overload on any one segment but to use mature judgement and circumspection in order to properly position your assets based on your individual goals and level of risk tolerance.
At present our positions are as follows:
Small Cap Funds
S&P 500 – Large Cap Funds
Nasdaq 100 Index Funds
International Growth Funds
Mid - week Alerts and Updates are issued as needed.