Beginning To Feel It

Compared to this time last year, I am willing to bet you are feeling a little less certain about your financial situation. Rather than reading about “global synchronized growth” you are now primarily concerned about U.S. growth or just growth period. And looking at your stock portfolio you may be wondering just what did happen, or not happen, in 2018.

It was this certainty of beliefs that led me in late 2017 to call a Top of Tops in November 2017, not only for stocks but also vis-à-vis bonds at the time. While the timing turned out to be premature, as stocks widely peaked a couple of months later, it was sentiment that led to the forecast.

Some of you may wish that you had lighted upon stocks prior to 2018. Volatility, which seemed to become extinct in recent years, reared its ugly head as a reminder that investments are not a perpetual growth machine; investments are part of markets and their prices will behave accordingly.

This is important to remember as my forecast of a trend change in stock prices has now become an actual trend change in stock prices. Together with the 2012 trend change in the direction of interest rates and you now face the double whammy of bear market trends in both stocks and bonds.

For those of you searching for historical corollaries to simultaneous stock/bond bear markets, I offer just one word: unprecedented. In other words, if you were not a fan of the pick-up in volatility in 2018, you will probably be disappointed in 2019. I expect much to happen and the surprises should occur in the direction of trend, meaning lower prices.

I don’t spend much time, or any, actually explaining why stock and bond prices should move lower; I look to market prices and sentiment (as discussed earlier). The ‘why’ is not important. Preparation and action is important.

You may not believe me when I say the trend is now to lower prices, but once prices turn, as they now have, you may be more apt to believe me. Again, the important is preparation (that is why I have been talking about it for over a year now) and even more importantly, action.

With stocks and bonds trending lower in price, now is not the time to seek alternatives. Commodities, like oil, and real estate or other mash-ups of stocks and bonds will have a tough time as well. Peak sentiment and the peak pricing that occurs in conjunction with it, is now waning, taking prices with it.

Take a look at your own investments. Take a look at the baskets of assets you own or however you keep score. I’m willing to bet these prices are moving lower and this should just be the beginning.

Getting out early can be critical. As prices swoon, pricing suffers, but so does the cost (and sometimes the ability) to sell. I refer back to unprecedented. Now is not the time to be invested in something new, in a hybrid, alternative or other investment of what might be shady liquidity. Your return on investment does not compare when the return of your investment becomes more doubtful.  Like peak sentiment last year, liquidity may also be waning, just when you may want it or demand it. Again, the time to review and act is now.

Liquidity and safety lie in the asset class known as cash. Finding suitable, worthwhile cash alternatives is what you have experienced here at The Select Approach^TM. As other markets have turned, Cash is King. As you begin to hear the phrase “nowhere to hide” more and more, remember you do have a place; a worthwhile place.