According to CNN Money at the close of the market on August 12, 2015, the S&P 500 Index year-to-date (1/1/15-8/12/15) return is 1.32%. That may be the good news. The bad news, according to Tom Kigore on the same day at MarketWatch, could be a rare “death cross” that appeared in the charts that suggest that “the stock market may have already begun a new long-term downtrend.”
“The S&P 500 appears to be in a topping pattern, has tested its 200 day moving average twice recently and is now in a crucial period where it is testing the 200 day moving average for a third time,” says Sean Hanlon, CEO & CIO,Hanlon Investment Management. Hanlon goes on to say, “This is a very cautionary sign, especially since no upside breakouts have occurred after each test of the 200 day moving average. A break of the S&P 500 below its 200 day moving average would be technically negative.”
I am fond of saying, bull or bear, we don’t care! Savvy investors, in my opinion, can do three things to manage their assets:
- First, theyinvest inother asset classes in addition to cash, bonds, and stocks.
- Second, they identify areas where demographic trends are like winds beneath their wings to help keep values intact. With roughly 10,000 people a day turning 65 through 2029, according to Pew Research Center, it may make dollars and sense to identify companies, properties, and services that are meeting the needs of the 76 million Boomers born between 1946 and 1964, who range in age from 51 to 69 this year.
- Third, they don’t leave their hard earned money on the tracks ready to get hit by a train. Instead they apply active management strategies that move money out of risky assets in a bad year and back on the track in good years.
Dear Past, thanks for all the lessons. Dear Future, I'm ready...
David Stockman, the former Ronald Reagan OMB director on CNBC’s Futures Now program, on August 6, 2014 said, “I think it’s pretty obvious that the top is in. The S&P 500 has traded in a historically narrow range for better part of 2015, having moved just 1 percent higher year to date. It’s just waiting for the knee-jerk bulls, robo-traders and dip buyersto finally capitulate.”
At first glance, this slide on the left satisfies the buy and hold crowd. But notice the declines in red year end values for the S&P 500. Notice by investing in three asset classes, the losses were not as severe, within that limit loss, and the recovery did not require a swing for the fences. As a result of limiting losses, the value ended higher by $329,140.
With the slide on the right let’s suppose that investors required withdrawals of $5,000 a month or $60,000 a year income from 2001 to 2015. In both cases the withdrawals exceeded $840,000, but instead of waking up to a value of about $111,000, the more diversified investor in three asset classes, not just one, had a balance of $492,172 by the end of the first quarter, 2015. Take the time to look at your recent history to see what you might have done so that your account may have held up better the last time the grits hit the pan. After all, you can never be ready too soon. Since longevity is the wild card and we are all living longer than we ever imagined, we need to do all things possible to stay in the game called life. If an investor had one million dollars in 2001 it would not be my idea of fun to wake up to $111,000 fourteen or fifteen years later. That’s called a hard landing.
“The best way to predict your future is to create it.” - Abraham Lincoln
No one can predict the future, but we can all be better prepared. It’s your life and it’s your money, so stay alert and engaged. In the words of Mahatma Gandhi, “The future depends on what we do in the present.”