“September is typically the worst month of the year for U.S. stocks, and there's plenty to worry about this time around. Markets will have to grapple with a possible Federal Reserve decision to begin unwinding its balance sheet, along with a looming debt-ceiling deadline in Congress on Sept. 30,” reports The Street, September 5, 2017.
But veteran strategist Sam Stovall, chief investment strategist at CFRA Research, submits an even bigger concern for the market could be continued issues from North Korea, which has been risking war with the U.S.A. by testing nuclear-capable missiles this year.
"September is on average the worst month, on average down more than it is up since WWII. It is a window dressing month for investors and mutual funds. The biggest uncertainty comes from North Korea," Stovall said in his interview, The Street, on the same day. "We're trying to put a rational conclusion on an irrational leader, and that just doesn't work."
On Friday, September 1, 2017, Gary Cohn, National Economic Council Director said on Fox Business Network that tax reform efforts to cut corporate and individual income taxes, reduce deductions, and simplify the code were a “once in a lifetime opportunity.” But Harvard professor and Clinton’s Treasury Department Secretary Larry Summers retorts, “This is an effort to cut taxes, principally to cut taxes on business in ways that will benefit a small part of the population and will do very little, in my judgment, for the economy,” Summers said on September 5, 2017 in an interview with Bloomberg Television. “The great danger here is that we’re going to have some kind of giveaway that is going to impoverish the public sector with respect to huge challenges that it faces down the road.” Summers went on to say that the current administration’s tax proposals pale in comparison to the income tax reform undertakings in the 1980s and is not likely to do much to boost America’s economic growth.
As one smart friend opines, “Opinions are like belly buttons, everybody has one.” What we are looking for are informed opinions. Before one were to assert that there is a political agenda in this message I must say, not so fast. As you know, it is my point of view that reading the economic tea leaves well is a function of studying the buying behavior of ordinary consumers first, and educated or affluent consumers second, based on age. It was during the 1980s that Baby Boomers believed you couldn’t trust anyone over 30. That was when the group born between 1946 and1964. So when Ronald Reagan became president that group 76 million strong ranged in age from 16-34. All of this means that is relatively easy to wave we can do it again flag, especially when we don’t bother to look at the Boomers who range in age from 53 to 71 this year. Again, “11,000 people a day are turning 65 through the mid-2030s,” as Jeff Hanson, CEO, Griffin-American HealthCare REIT brings to our attention.
It might be cute, but it won’t cut the mustard. President Trump’s budget director Mick Mulvaney in the Wall Street Journal on July 13, 2017 wowed the crowd with his “MAGA-nomics,” his play on Trump’s rallying cry, “Make America Great Again.” The unveiling of MAGA-nomics is a step back from the President’s 4 percent economic growth goal. Mulvaney clearly said, “means sustained 3 percent economic growth.” In his July 13, 2017 article, Vice Money’s Matt Phillips put it this way, “it could be possible to get the U.S. economy revved up to 4 percent, but not without taking a lot of risks by letting banks create another mortgage bubble that’s bound to end badly. Of course, consumer borrowing would have to play a big part in getting the economy to grow at even three percent too, since other key drivers of economic growth, like population growth and advances in productivity, are pretty much stagnant.
In past articles I shared that in the month of October, 2008 investors experienced a 25% loss in value according to Yahoo Finance. This detail made me more curious. “If you had invested in the S&P 500 just for the month of September over the past 50 years, you would have lost 29 percent of your capital, according to Bespoke Investment Group. That’s quite remarkable given that the S&P 500 has gone up more than 25-fold overall during those same 50 years, from around 97 in 1967 to about 2,475 today,” reports James “Rev Shark DePorre at the Street, September 5, 2017. DePorre says further, “With numbers like that, there’s no dispute that September is historically the worst performing month of the year for the market. There are theories about why that’s the case, but nothing definitive has ever been established. The third quarter’s end just seems to be a lull period of stocks, and that’s happened enough to be statistically significant.”
Suppose a ‘lull period’ doesn’t seem to end? Here’s what I know. With Hurricanes Irma and Jose on the warpath, when disasters strike there is no time to prepare. Hypothetically speaking, just imagine for a moment that a financial disaster is waiting in the wings that could cause your net worth to be cut in one-half. Further, that it takes over twenty years for what you are left with to get back to the levels you had before disaster(s) struck. If, for example the drawdown after declines and withdrawals is 60 percent, that means what was $1,000,000 becomes $400,000. A gain of 150 percent is needed for $400,000 to return to the $1,000,000 starting value. I have three questions here for you.
1. Do you like those odds?
2. Could you weather that storm?
3. Will you take the luxury of time you have now to get ready?
“This is a nuclear hurricane,” Miami Beach Mayor Philip Levine said on CNN, September 6, 2017. Just as hurricane survivors have planned places to shelter in advance so they can stay alive on this side of the grass, savvy investors may discover strategies to keep their life savings intact. For those, on the other hand, who believe they can ‘ride it out’ let me say again, when disaster strikes there is no time to prepare.
The proof is in the planning.
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The opinions voiced are for general information only. They are not intended to provide specific advice or recommendations for any individual and do not constitute an endorsement by NPC. To determine which investments may be appropriate for you, consult with your financial professional. Please remember that investment decisions should be based on an individual’s goals, time horizon, and tolerance for risk. Investing involved risk including the potential loss of principal. No investment strategy can guarantee a profit or protect against a loss in periods of declining value. Example used as illustration only, not indicative of any particular investment, actual results will vary.
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