Salt Lake City Office
2150 East 1300 South,
Scenarios on many people’s minds:
With the Coronavirus pandemic continuing and social unrest spreading across the country, it is difficult to predict the future. From all outward appearances the bond and stock markets act like they are rallying. Is this an indicator that the bull market we enjoyed for so long is back? Or is this what is sometimes referred to as a bear market rally?
Those of you who know me will know I want to be in the room where it happens, in the middle of the financial process. Volatility signals change. Things have changed, some things for a time, and some things will be forever different. What served us well in the past may not do so in the future. One thing we know after a worldwide event such as the pandemic, is that the “new normal” will look different. September 11th changed air travel, the 2008 housing crisis changed the mortgage process and how comfortable many of us are in the world of finance.
Some changes will be short term. At our house we have a hypochondriac joke: “it’s my COVID acting up.” Short term oddity for three months does not mean the future of life indefinitely. Crisis is an anomaly and has never been a permanent decline in progress. Even as some things go down in value others go up.
Some changes will be longer term. We all have our own opinions, but what if you are wrong? The best way to see into the future is not to bet on the horse that won the race last year or the year before, and for sure not to follow the crowd. When you are betting on a horse race, look at the track, the horse, its health and fitness, as well as all of the other contenders and pick your winner.
Which changes are short and which ones are long term may be hard to predict. Investing is different from horse racing in that you don’t put your money on one horse. “Betting” on many horses, known as diversification, will give you a measure of protection, until it is safe to go back into the water. A well-diversified portfolio can include smart short-term focus and holding a sector or investment in anticipation of future upswings for the long-term. The right strategy for you and your holdings can only be determined by working with someone who can help you take the emotion out of the equations. Someone who can help you look at your time horizon, your risk tolerance and most importantly, your goals. Remember that investing can include having investments you don’t like in the portfolio, or watching your portfolio go down.
It is important during time of change, to look at things from many perspectives. Following fundamentals is important. Don’t believe everything you hear or see (the stock market rally).
Leading economic indicators are still falling. Two things to note– a leading indicator is one that helps determine economic changes and a lagging indicator follows economic changes.
Indices are a moving target—as of mid-May bullish leading indicators were plummeting, the data was ugly
What are some of the key leading economic indicators and what are they indicating in your life?
Times are confusing and hard. Some areas I like include, utilities—(great dividends),cash equivalents, being selective and going wider with high quality international, small and mid-caps (SMID) staying short term in diversified fixed income.
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Stay healthy and stay strong.