The Stock Market Indicator that you won’t hear about…

Dear Mr. Market:

We’ll open this letter to our friend “Mr. Market” by stating one thing that will be very obvious in six to 12 months. 90% of people reading this article will have gotten it wrong. It’s not your fault though…it’s the way our minds are wired and the content we’re constantly being fed.

Regardless of your current market strategy it’s times like this that will test the most patient of long-term investors. We’ve written about this countless times but no matter what the sage counsel or stock market adage is, you should be rattled right now. We could be like most “perma-bull” financial advisors and try to data mine for all the reasons to stay calm or share positive anecdotes to convince you that now is the time to invest; it won’t matter though. Putting “lipstick on a pig” won’t help you nor the current market environment. Bad news and reasons to panic will be the headline for the weeks to come and there will seemingly be no safe place to hide.

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Turn off your TV and enjoy your family, friends & some turkey!

Dear Mr. Market:

When it comes to the stock market it’s easy to see the road we just traveled; what’s more difficult is trying to assess and figure out where we’re going. In last quarter’s newsletter from My Portfolio Guide, LLC we put out a fairly bold prediction of the S&P 500 hitting 5,000 and the Dow Jones reaching 40,000 within the next year. Also included in that edition of “the Guide” (click here to view it if you haven’t already), we discussed some common behavioral biases that we’re all vulnerable to. As we head into Thanksgiving and then the last month of the year, the fear levels are beginning to mount again. There’s plenty to worry about, such as inflation, and speaking of that, it’s sort of like your in-laws visiting….They arrive earlier than you expected and stay longer than you’d like!

While we’re not telling people to be 100% into equities…it’s becoming more and more clear that for the foreseeable future there is no better horse to ride. We’re going to call this proverbial horse “Tina” and share why in a moment. Sure, our gold hedge is not providing instant riches but remember that is not why we bought it. Additionally, we’re seeing more and more people buying crypto as the “new gold” yet most can’t even explain what it actually is. We’d prefer to see Tom Brady pitching Subway sandwiches but now he’s doing crypto commercials. Bonds are awful and going nowhere (yet to some degree justified as part of your overall allocation). Cash is still earning “point zero nothing”. Real estate has exploded and bubbled upwards some more but does it feel smart to you to be the highest bidder on a property right now? All this leads us back to our horse TINA… There Is No Alternative.

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Good news = Bad news

Dear Mr. Market:

Last week was a microcosm of how stock market headlines can really lead you to hear one thing yet see another. For a while now we’ve been barking about how the FAANG stocks have artificially propped the market as there are some serious underlying health concerns. As a reminder for our newer readers, FAANG refers to the five major U.S. technology companies – Facebook (FB), Amazon (AMZN), Apple (AAPL), Netflix (NFLX), and Google (GOOGL). These household names have driven the markets and camouflaged some warning signs of risk on the horizon for quite some time. If you want a peek under the hood or a refresher on just what their impact, valuation, and market caps are relative to the broad market, please click here. (pay close attention to figure 18 which shows market cap with and without FAANG as well as Figures 13 & 14 for some relative earnings/revenue performance)

So…what happened last week? Why did the markets get hit so hard? It was indeed a rough week but then again not too many weeks feel all that bad when we take a quick look in the rear view mirror. (last year there were some mornings when the stock market was down literally -9% before you had your first sip of coffee) Albeit not a pleasant memory, don’t ever forget that (we’ll touch on why later in this article).

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