The last few days in the market have been anything but predictable! Or have they? Read my comments below that I wrote last week just days before the decline.


Happy New Year and a Peek at 2018

I know I sound like a broken record, but as the U.S. market indexes continue to set new records, my “worry Index” goes higher as well. I’m not worried about what I can see, I’m worried about what’s around the corner, down the road. While my “worry index” may be flashing yellow, most of the indicators I follow remain green. So core portfolios continue to be in a “risk on” bias and broadly diversified. I quote Benjamin Graham often but it bears repeating again, “Investment management is the management of risk, not the management of return.”

I have been in the wealth management field for almost 30 years and trying to predict markets is about as reliable as a 15-day weather forecast. But, here goes….

I believe 2018 will be a positive year in the U.S. and global markets. That might not seem like such a bold prediction considering as of this writing, 1/29/18, the market is already up almost 7.5% (S&P 500). I do believe that 2018 will be a much “bumpier ride” than 2017, which really was an anomaly with almost no downward movement and 12 consecutive months of positive returns – 1st time that has ever happened. Things tend to revert to the mean and this year will require more conviction in our beliefs and investment process. Let me be clear, however, I do not believe we will experience a recession in 2018 (U.S. or global). The economic picture is strong (“green lights”). So, when we experience these bumps, I believe for now, they will be temporary and the upward bias of stocks will continue. Of course, all bets are off if there is a geopolitical “event” somewhere in the world.

As you can read, this decline was predicted in my letter. Since last July as I have continued to craft “My Views” letters, I have warned that the end of the Bull Market is near. But also, as I predicted above, I do not believe this is a time for panic. I believe that money remains on the sidelines that will begin to trickle back into the market as the restlessness eases. There have been no changes in the economy! Our All Seasons Portfolio Strategy is built for periods in the market such as this. We are covered with the umbrella of protection by the diversification of our portfolio assets. Because each asset behaves differently in every market cycle, our declines are much less than the market decline percentages.

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