This Rocky Market is Beginning to Produce good Opportunities for Investors
The market volatility continues with year end tax loss selling exaggerating the move. The S&P 500 is on track to post its worst December since the Great Depression; pulling back nearly 10%. The news of the week was the Federal Reserve, who as predicted, hiked rates .25% on Wednesday. Their projected path of three rate hikes in 2019 was reduced to two, but market participants, who have been used to easy money, of course wanted the Fed to announce no more than one rate hike next year. We think that was an unrealistic expectation, but when market psyche turns, panic and emotion take over in the short run, which ultimately dictates price. Let’s just say we are not in a “sellers’ market” right now. As we mentioned last week, these are the times when opportunities arise. They are rarely found when people are cool and collective. This has been the first time in almost 24 months where we are really seeing some bargains out there. We are more than happy to buy quality securities from those who cannot afford to stay invested.
We were inspired by the Feds decision. We think that there is now more clarity that one to two more hikes will lead to the end of what has been nine consecutive increases. This path should get us to about a 3.00% to 3.25% 10-year U.S. Treasury yield in our view. That is more than accommodating to economic growth and makes dividend stocks look extremely attractive for long term investors. Once the dust settles, just like every other market correction, investors will look back and say I should have bought that stock when it was trading so low. Luckily for our clients, we are looking to be opportunistic on your behalf. In our view we are getting close to levels where we should see some support and we think another 6-8% downside would be a gift for buyers. Surprisingly of the hundreds of clients we have, we have heard from less than a handful during this volatility. One longtime client of Robert told him the other day, “Robert we have been with you so long that we know you do all the worrying for us.” Robert attributes it more to our dedicated advisors and the continued effort to educate our investors.
We are optimistic for the next three years as foreign markets are flashing a bright green light, and what was between yellow and red on U.S stocks, is now inching back towards green. We expect the volatility to continue through mid-January, but we have our shopping list ready and are very close to bringing some new opportunities into the portfolios for investors very soon.
We will be taking next week off for the holidays from the newsletter but will return January 4th. By mid-January will be releasing our 2019 forecast. We wish you all Happy Holidays and a happy, healthy and prosperous 2019! See you in the New Year.