Most people don’t worry about risk in their portfolios until they lose an amount of money that makes them uncomfortable. As a risk manager, I usually get the most inquiries into my services after the stock/bond market has fallen, which is unfortunate because the losses have already been incurred.
If you are invested in bonds, you need to review your holdings now! Bond yields have been falling for over 35 years which has been positive for bond prices. However, we are now transitioning into what is probably going to be a long-term period of rising yields. Rising yields mean falling bond prices and we are already seeing bond prices fall.
See my newsletters from last year on this subject:
Bonds a Ticking Time Bomb I – October 4, 2017
Bonds a Ticking Time Bomb II – October 25, 2017
Also, you should be wary of stock market risk even though we are in a bull market. As I mentioned in a recent newsletter on the business cycle (see link below), we are in the later stages of this bull market and typically stocks are the next asset class to transition into a bear market after bonds. The last two bear markets (in 2000 and 2008) saw the stock market fall around 50%, so the risk is high.
Business Cycle Newsletter – January 29, 2018
Reviewing someone’s investment accounts is very time-consuming for me. I normally only have time to work with two or three people per month. If you are interested, I have two slots available for March. In order to review your holdings, I need a spreadsheet of your holdings or a copy of your most recent investment statement.
The first two people to contact me will get scheduled for an account review next month.
If you have any questions, please feel free to contact me.
The Bottom Line
Bias:
Positive for Stocks and Commodity Prices
Negative for Interest Rate Sensitive Bonds
• Even though the stock market fell 10% earlier this month, we are still in a bull market.
• When the S&P 500 is hitting all-time highs, international markets are advancing strongly, and market breadth is positive – there is no other way to view the market other than positive!
• Interest rate sensitive bonds are falling and could be transitioning into a long-term bear market.
• Long-term, the weight of the evidence continues to be bullish for stocks. At some point, this will change and when it does, I will have no problem flipping to a bearish bias and reallocating client accounts to a more defensive posture. However, market technicals continue to signal that we are in a bull market and thus we should be invested in stocks aggressively.
Client Update
I continue to view stock market risk as low, thus our accounts have high stock market exposure.
I have continued to add to our equity holdings by buying stocks and stock funds that have pulled back and are in long-term up-trends.
We do not hold any interest rate sensitive bond funds.
Craig Thompson, ChFC
Email: [email protected]
Phone: 619-709-0066
Asset Solutions Advisory Services, Inc. is a Fee-Only Registered Investment Advisor specializing in helping the needs of retirees, those nearing retirement, and other investors with similar investment goals.
We are an “active” money manager that looks to generate steady long-term returns, while protecting clients from large losses during major market corrections.
Asset Solutions is a registered investment adviser. Information presented is for educational purposes only and does not intend to make an offer or solicitation for the sale or purchase of any specific securities, investments, or investment strategies. Investments involve risk and unless otherwise stated, are not guaranteed. Be sure to first consult with a qualified financial adviser and/or tax professional before implementing any strategy discussed herein. Past performance is not indicative of future performance.