Q2 2019 Market Update

For this 2nd Quarter Market Update I am going to keep it short and sweet. Please find below an article link, that I honestly could not have stated any more clearly myself, as an analysis of exactly where things stand today for investors.

 

https://northmantrader.com/2019/07/14/the-choice/

 

In addition, since the start of July I have been warning people to “Beware the first Rate Cut” and for good reason. We have all seen what has happened in markets so far as a result of the Fed’s Rate Cut enacted at their recent meeting on 7/31/2019. For reference, here is a visual of past “Market Reactions” to previous initial Rate Cuts by the Fed.

 

Market Drop, Initial rate Cut, Market Reaction.

Market reactions to the last two “first” rate cuts

 

One final thing to consider. Please take a look at the current divergence between the S&P 500 Index and US Corporate Profits:

 

Market drop, corporate profits divergence, market reaction

The divergence between the S&P 500 Index and US Corporate Profits

And in 2007:

 

Market drop, corporate profits divergence, market reaction

The divergence between the S&P 500 Index and US Corporate Profits and the subsequent “reconnect” in 2007/2008

And in 2000:

 

Market Drop, Corporate Profits divergence, market reaction.

The divergence between the S&P 500 Index and US Corporate Profits and the subsequent “reconnect” in 2000/2001

 

Please remember that “History Never Repeats, But It Does Often Rhyme”… Trade accordingly…

 

And if you think that Wall Street knows what they are doing. Please look below and think again. Not a single one of them saw it coming last time either…

 

Wall Street 2008 Forecast

Wall Street 2008 Forecast

C’est La Vie!!!

 

 

So how have our 5 Model Portfolio Funds fared since their respective inceptions? Here are the updated lifetime performance graphs as of 8/2/2019.

 

Conservative “Total Return Income” Model since 8/1/17, +2.92%: (Broad US Markets VLGI in Gray, -3.75%)

Beat the market, Value Line Geometric Index, VLG, Conservative Model Fund, Total Return Income Model Fund.

Conservative “Total Return Income” Model since 8/1/17, +2.92%: (Broad US Markets VLGI in Gray, -3.75%)

 

Moderate “Global Opportunity” Model since 8/1/17. +0.19%: (Broad US Markets VLGI in Gray, -3.75%)

Beat the market, Value Line Geometric Index, VLG, Moderate Model Fund, Global Opportunity Model Fund

Moderate “Global Opportunity” Model since 8/1/17. +0.19%: (Broad US Markets VLGI in Gray, -3.75%)

 

Aggressive “100% International Equities” Model since 8/1/18, -1.96%: (Broad US Markets VLGI in Gray, -10.53%)

Beat the market, Value Line Geometric Index, VLG, Aggressive Model Fund, 100% International Equities Model Fund

Aggressive “100% International Equities” Model since 8/1/18, -1.96%: (Broad US Markets VLGI in Gray, -10.53%)

 

Aggressive “100% US Equities” Model since 8/1/18, +5.42%: (Broad US Markets VLGI in Gray, -10.53%)

Beat the market, Value Line Geometric Index, VLG, Aggressive Model Fund, 100% US Equities Model Fund

Aggressive “100% US Equities” Model since 8/1/18, +5.42%: (Broad US Markets VLGI in Gray, -10.53%)

 

Contrarian “Long/Short All Weather” Model since 8/1/17, -8.86%: (Broad US Markets VLGI in Gray, -3.75%)

Long/Short, All Weather Fund, Value Line Geometric Index, VLG, Contrarian Model Fund, Long/Short All Weather Contrarian Model Fund

Contrarian “Long/Short All Weather” Model since 8/1/17, -8.86%: (Broad US Markets VLGI in Gray, -3.75%)

 

As you can see 4 of the 5 funds are still all outperforming the Broad US Markets (VLGI) over their respective “lifespans” since they were each started.

 

The last Long/Short Fund is specifically designed to benefit from the larger Macro Economic changes yet to come with an increase in commodity inflation (think current Midwest Farmland floods and reduced supply and ultimately a weakening US Dollar) and from the inevitable recession and market swoon/drop/crash (Pick your poison). But History is telling us that right now is a great time to “Love Commodities” and be “Cautious with Stocks”…

S&P 500 Index, Bloomberg, Commodities Index, Severe divergence, historical divergence between stocks and commodities.

Historical Divergence between the S&P 500 Index and the Bloomberg Commodity Index.

S&P 500 Index, Bloomberg, Commodities Index, Severe divergence, historical divergence between stocks and commodities.

Historical Divergence between the S&P 500 Index and the Bloomberg Commodity Index.

 

Our approach is quite simple: “Invest for Growth, but more importantly Mitigate the Losses, if we do that Returns will take care of themselves”. So if we mitigate the Large Losses in the first place, then we DO NOT have to “Make Back” those losses and so it becomes growth on top of growth. Now think about that over Full Market Cycles (Both Up & Down) and you start to see the value of what we do. The chart below shows a “Buy & Hold” approach (Orange Line) with 100% invested in the S&P 500 Index Vs. a simple “Buy, Hold & Sell” (what we do)(Blue Line) strategy to mitigate and extract the large losses out of the performance equation. You see what can happen to “the numbers” yourself…

S&P 500 Index, Buy & Hold, Buy Hold & Sell, Risk Management, Loss Mitigation, Loss Protection, Market Loss, Market Risk, Exceptional Reurns, outsized returns.

“Buy & Hold” Vs. “Buy, Hold & Sell – Risk Management”

 

Please feel free to reach out to me with any questions.

 

Take care and talk again soon,

 

Cory Reader

Chief Investment Officer

HK Wealth Management, Inc.

Southern California

213-509-6544

Email:  creader@hkwmanagement.com

Web:  www.hkwmanagement.com

Past performance does not guarantee future results.  All investments carry some degree of risk.

The Answer is:  YES!

Posted in Market UpdateTagged , , , , , , , , , , , , , , , , , , , , , , , , , , , , ,  |  Leave a comment

Leave a reply