Market Update 12/20/18
Submitted by Fokken Financial Services on 1/9/19 Article "Market Update and Trading"written by Mark Sorensen of Royal Fund Management
We believe we have reached a point where fear has been raised to a level where we are near a bottom. VIX has risen substantially, gold is seeing a bid, the dollar index is going lower and, we are seeing an obvious flight to quality in the bond market irrespective of Fed tightening. Note: We are not calling the bottom in an emotionally driven market. Therefore, we will be raising some cash in the Equity Dividend Model and replacing some positions with equities that we expect will be poised for better growth once the market begins to turn. We will not be buying immediately and will not be fully invested near term. We will stage buying over time as we continue to monitor market conditions.
With an intermediate to longer term outlook, it is near the time to be greedy when others are fearful which is a famous Warren Buffet quote. Technical and algorithmic trading is winning the day but fundamentally the market is oversold tremendously. We are now trading at about 14x earnings and growth is still expected, though not at the pace of post tax reform levels. Corporate earnings direction is still generally positive. Markets always overdo it up and down and we expect the market to again focus on fundamentals soon.
The shorter the time frame the harder it is to make any kind of prediction, however, given some time we expect the market to recover as it always does. Try to avoid the emotions of the moment and communicate with your clients so they might avoid making emotional decisions too. This is not the time to sell. Looking back this will be viewed as an opportunity. Selling into the fear nearly always puts you in the wrong place twice.
We will provide further details on new positions as we begin to stage in slowly.