In my last post on July 12th, I mentioned the Stock Market and Tech stocks will pull back, and it did, however, I also said it was No Time to Panic.

The reason for the No Time to Panic comment had to do with what is going on right now, the market and Tech stocks are recovering close to where they were a few weeks ago.

The market had a mini crash a couple weeks ago on Monday, August 5th, and at that time stocks like Nvidia, NVDA,  dropped down to $90 after hitting $134 twice in the past 60 days.  Nvidia is climbing closer to $134 leading up to their earnings announcement on August 28th.  Right before it reports earnings, may be a good time to sell all or some of your position, rather than watch it drop back to $100 in the near future.

Now NVDA may go higher, then again, it just showed you it can go to $90.  This is why I said No Time to Panic, declines can happen, you get to see where stocks can drop in the down times, and can educate you when the stock recovers closer to its all-time high, you may want to trim the position or sell it all together before it drops again.

If you felt uneasy about your portfolio during the recent declines, now you have an opportunity to proactively trim or sell positions, and get your portfolio risk back in a comfortable balance.

We recently saw similar action with Facebook/Meta, up to $524 after their last earnings announcement, recently dropped to $442, and now it has risen to $540.  

In my opinion, now is a good time to sell a portion or all of the position, even though the momentum is in their favor.

We know the Storm Clouds are coming in for our Economy and Corporate Profits.  Forward guidance is being lowered, Meta and other Tech stocks may have a little more upside, however, they could also have tremendous downside from current levels.

Recent data continues to show strength and weakness with jobs and our economy, depending on which data you are analyzing.  Today retail numbers show consumers are still spending strong, however, credit card companies are also reporting consumer debt balances are near all-time highs, and late payments are on the rise.  Therefore, strong consumer spending can actually be more concerning, than be satisfying.

Companies are starting to report reductions in their employment numbers, as they start reducing staff for the expected slowdown in demand.  NONE of this data is overwhelmingly negative, but as I said in my last post, the Storm Clouds are moving in.

We know that means are economy will slow, now all of us financial professionals can debate whether we will have a Hard Landing or Soft Landing, but either way, the growth this market has seen for over a year now, will not continue at this pace.

Stocks are getting close to being priced for perfection once again.

Something has to give during economic cycles, similar to were we are headed now.  It will not end with the economy slowing down, consumer spending slowing down, job cuts increasing, and the Stock Market increasing while all of that is happening.

We have been and will continue to be in a Market of Stocks, and not a Stock Market.  Owning the right stocks will be important, and not owning the broad spectrum of stocks, such as Index Funds.

With Money Market Funds currently yielding 5%+ on an annual basis, which will go down as the Fed Lowers the Federal Funds Rate, now is a good time to lower your market exposure, especially if you only need a 5%-6% annual return from your investments to get into or through Retirement.

If you are looking for professional management or a second opinion on your investment allocation, please contact us, J.Wigen@IFManagers.com.

Best of luck to all of you!

James CAM® ChFM® CPM® CWM® designations are issued through Global Academy of Finance and Management or GAFM®.

Investing involves serious risks and past performance is no guarantee of future performance or success.  This is not an offer to buy or sell securities and nothing contained herein should be interpreted as a recommendation regarding any investment or investment strategy.  Before making any decision to invest, first read the relevant disclosures and important information provided to you.

Please take the proper risk for your current situation and get the advice from a financial professional who clearly understands your current & future goals and objectives.

Investments are NOT FDIC INSURED * MAY LOSE VALUE * NO BANK GUARANTEE 

Over the past few weeks, we have learned economic data is showing signs of consumer spending declines, and corporate profit outlooks coming down.

Fast Food chains now offering meals around $5, Walmart announcing they see consumers spending less on items over $10, and corporations taking down revenue expectations for 2024.  In addition, we are hearing late payments for cars, homes, and credit cards are all Increasing.

Home sale listings are increasing too, even with 3% mortgage rates many owners enjoy.  Why is this happening, it all leads to consumers have simply lost the battle from high inflation over the past 2 years.

We recently learned Lamborghini waiting list has gone from 18 months, to ZERO months, as interested buyers can grab a car off the lot right now.  You may be thinking, who cares about people who can afford Lamborghinis, but it shows consumers spending less at Walmart, late payments on essentials, and high-end buyers all showing signs of spending exhaustion.

This does not mean a recession is around the corner, it simply means a Stock Market at All-Time Highs may need to take a break for a few months.  Money will move out of Top Tech stocks, find a short-term home with Value stocks, and come back to Top Tech stocks after a brief pull-back.

Money rotates from sector to sector because most Mutual Fund companies and many Asset Management firms are not allowed to move out of Stocks and into Money Market Funds, more than 5% of the fund asset level.

Many Financial Advisors managing Discretionary client accounts generally won’t move client assets to Money Market Funds because they can’t justify charging clients management fees to sit in Money Market Funds, therefore, they find Large Cap safe companies to invest in for a short period.

It’s not unusual to see the market cool down in the Summer and Decline from August to Mid-October.  As the slow period of the year for many publicly traded companies is third quarter, and those earnings are released early to Mid-October.  History shows the best returns from the Stock Market happen between Mid-October to Mid-April.

Technology sector has allowed the S&P 500 Index to perform very well in 2024, and we should see a short Tech sell-off in the next couple months.  Even as a Tech sell-off is likely, AI related companies, Semis, Software, and Hardware stocks should see a very strong recovery to the end of 2024.

As job layoffs will increase, corporations will take those payroll savings and increase spending to automate their processes, leading to relying less on humans and more on Technology moving forward.

Over my 28+ year career, we have seen this happen during every economic downturn, and we are starting another downturn right now.  Remember, 18 months after the Fed Funds Rate goes above 5%, we have seen the economic storm clouds move in much faster over the past three decades.  We can never predict the severity of the storm, but a storm is coming.

November 2024, is the 18th month since the Fed Funds Rate went above 5%.

Individual Stock Selection becomes much more important during these economic slowdowns, rather than own Index Funds or Mutual Funds with hundreds of stocks within the fund.  These type of investments contain stocks which represent a wide range of sectors, and when that is the case, it becomes much more challenging to grow your portfolio.

Contact me if you are interested in a portfolio review.  Fees depend on size of your portfolio, time it will take to review your holdings, and whether you want a detailed plan for future growth or income.

J.Wigen@IFManagers.com

Best of luck to all of you!

Stock Split Mania, Here to Stay in 2024

June 14, 2024

We have seen a new trend with several 10 for 1 Stock Splits being announced recently, and that news helped skyrocket stock prices for companies making the announcement.

This trend should continue throughout 2024.

With several Tech companies announcing Mediocre earnings and lowering their forward guidance this past quarter, and seeing their stock price drop 10%-30%, many now wish they would have announced a Stock Split to help reduce the decline.

With apps like Robinhood, the Meme Stock & Option trading frenzy, companies are now realizing their $500-$1,000 per share stock price needs to substantially come down.  This strategy to lower a stock price is needed to bring in more Retail investors, and increase the buy orders to drive a company’s stock price higher.

The fascination of media coverage on Meme stocks now is extremely unhealthy, as it was during the Dot-Com era.  These Meme stock trades are treated as a game, and is nothing short of Gambling!

If you watch enough CNBC & Bloomberg financial coverage, you will see several stories each day about GameStop stock.  The company’s business is rapidly declining, and the Cash they have on hand comes from selling their own company stock when Media coverage pushes their stock price higher.

Nothing is Cool about implementing a investment strategy where “Hope” determines your Gains or Losses.

High Risk Uncovered Options trading has once again become extremely popular, similar to what we saw during the Dot-Com era, and we all know how that ended.

It is important to understand Option trading can be a very complex strategy to use, one that can actually Reduce your Risk with a individual stock, by using a COVERED Options strategy, and the VERY Risky UNCOVERED Options strategy.

Covered, means you own at least 100 shares of the underlying stock, and Uncovered means you Do Not own the underlying stock.

Investors using apps like Robinhood prefer to use Uncovered Options, a cheaper way to gain exposure to a stock without having to commit as much money to purchase the stock.

Uncovered Options, should NEVER be used by Retail investors, as the Risks are too great, and you may lose 100% of your money.

One Option contract requires you to own 100 shares of the underlying company, with this requirement, it’s almost impossible for Retail investors to own 100 shares of a $500-$1,000 per share stock.

The trend is moving towards companies announcing Stock Splits, which allow a $1,000 per share stock price to become $100 per share, using a 10 for 1 Stock Split strategy.

For over the past year, Tech companies have announced positive earnings, raised their forward guidance, and have benefited from their stock price rising rapidly.  This trend is coming to an end, based on what we have heard from many Tech earnings announcements this past quarter.

There is about a dozen Tech companies who can do no wrong, and their stock price keeps accelerating.  With Meta (facebook) after their recent earnings announcement, their stock price dropped from over $500 to $430, the reason for the drop, lowered forward expectations.

Several other Tech stocks had similar forward statements, and saw their stock drop 10%-30% as well.

Many investors feel they have missed the Tech trade, and many have.  To get into those type of stocks now could be putting you in a situation where your Tech investments drop significantly, when forward guidance is reduced, based on Economic Data starting to show negative signs.

I believe 2024 and 2007 have many similarities; 5%+ Federal Funds rate at the start of the year,

 Economic Data starting to show signs of weakness, and the Fed Lowering Federal Funds rate.

In Summer 2007, the Fed cut Federal Funds rate 25 basis points, helping drive the markets higher, until the collapse of the markets in mid-October 2007, and the word Recession used in December 2007.

I am Not predicting the stock market will drop in 2024, as it did in 2007, considering much of the drop in 2007 was related to the Credit Crisis.  We all remember this Credit Crisis helped bring Global Lending institutions to their knees, thankfully, we don’t anticipate anything like that happening again anytime soon.

However, if the US Debt doesn’t get under control soon, all bets are off in the coming years.

I am watching Buy Now, Pay Later very closely.  I am not a fan of people buying $50 worth of teeth whitening and taking the option of splitting those payments up over 3-4 months.

Once consumers rely on this payment method and start missing payments on that loan, Buy Now, Pay Later credit availability will dry up, and consumer spending comes to a screeching halt.

The dark storm clouds from Economic Data is getting closer.  Investors should Not panic, but should be aware those dark storm clouds cause no immediate threat, however, need to be watched closely moving into 2025.

Investors need to remember, stock prices today are pricing in events 6-12 months in advance, which is how sharp declines in stocks can happen, even though Economic Data is Mediocre, and Not declining sharply.

We can have Market Recessions without Economic Recessions!

Please contact me if you are interested in a second opinion on your current investment allocation or you have Cash you are looking to invest.

The right individual stocks can perform much better, while being less risky, than relying on the overall market in Economic conditions like we are in now, and moving into 2025.

J.Wigen@IFManagers.com

Investing involves serious risks and past performance is no guarantee of future performance or success.  This is not an offer to buy or sell securities and nothing contained herein should be interpreted as a recommendation regarding any investment or investment strategy.  Before making any decision to invest, first read the relevant disclosures and important information provided to you.

Please take the proper risk for your current situation and get the advice from a financial professional who clearly understands your current & future goals and objectives.

Investments are NOT FDIC INSURED * MAY LOSE VALUE * NO BANK GUARANTEE   

All opinions expressed by James R. Wigen on this website are solely his opinions and do not reflect the opinions of IFP Advisors, LLC, dba Independent Financial Partners, (IFP).  Investment Advice offered through IFP Advisors, LLC, dba Independent Financial Partners (IFP), a Registered Investment Adviser. IFP and Independent Financial Management, LLC (IFM), are separate entities.

WHAT IS CAUSING MARKETS TO DECLINE LATELY?

April 18, 2024

We are noticing a recent decline in the stock market, and there are several reasons for it.

The most recent decline is a reaction to the 10-Year Treasury Yield moving closer to 5%, the exact same scenario we experienced in October 2023, pushing markets lower around 8%.

The stock market has been on a tremendous run since October 27th, 2023, however, we are now seeing some of those gains decline.  At this time, there doesn't seem to be any reason to be worried, a healthy pull-back from a tired market is to be expected.

Economic data is strong, which is part of the reason the market is moving lower.  Investors are concerned the strong economic data will prevent the Federal Reserve from starting to cut the Federal Funds rate until much later this year.  

Most predictions were the Fed would start cutting Spring 2024, and now with recent data that will not happen.

As I stated on my blog late December 2023, the market will go through periods of volatility in 2024, as investors continues to digest economic data, corporate earnings, and forward looking projections from CEOs during earnings announcements.

If we look back to 2007, the market experienced a healthy rise most of the year, even though the Fed actually cut the Federal Funds rate, which means economic data started showing signs of weakness, primarily coming from Consumers falling behind in their credit card, housing and car loan payments.  

All seemed fine in 2007, until middle part of October, when the market started crashing, and by December economists were using the Recession word.

As of last Friday, earnings are starting to be announced for the 1st quarter of 2024.  We will quickly learn where the market could be headed based on forward looking statements made during these earnings announcements, and not earnings results alone.

A few important comparisons with 2007 investors should keep an eye on, Consumer Spending & Consumer Debt management.  We are already seeing consumers falling behind on debt payments, maxing out credit cards, and once Buy Now Pay Later payments start showing increasing delinquencies, we may see the market pull-back 10%-20%.  

As usual, it's not if it will happen, it's always when it will happen that is tough to predict.

As investors, all we can do is stay focused on the data, and stay objective, not allowing a bull or bear bias to impact investing strategies.  Money Market yields are currently offering around 5%, for many of you, that yield puts you very close to the annual return your financial plan indicated you need, to get into and through retirement.  

This data should allow you to lower your risk profile within your investment allocations.

Keep up with pre-tax contributions to retirement accounts, because the tax bracket most of you are in, is higher than what you will experience from the market the rest of 2024, especially since the market has had a fantastic run year to date.  

Inside your 401k you have a Money Market type investment option, this investment option should be yielding close to 5% right now, and with your pre-tax contributions lowering your taxable income, this combination may be your best strategy the rest of 2024.

Part of the reason the market is down the past few weeks in expectations the Fed can't cut Fed Funds rate, which means Money Market yields should continue to be around 5% for the coming months.  As the Federal Reserve cuts the Fed Funds rate, the yield on Money Market funds will decline as well.

The jobs report is showing a strong labor force, however, the jobs report and the way the data is collected does not properly showcase GIG workers.  

In years past, if I lost my job I would collect $1,200 a month in unemployment, not anymore.  In today's world, if I lost my job, I would not file for unemployment and collect $1,200 dollars, I would start driving for companies such as Uber, Lyft, DoorDash, Shipt or Amazon.

Once I start driving with all of those companies as an Independent Contractor, each of them report a new hire, even though it's one person driving for multiple companies, and they report multiple new hires.  

One person could be collecting income from 4-5 of the companies I listed, at the same time they may be looking for 1 new job that pays them wages similar to what they were earning before they lost their job.

Once they find a new job, many will not contact the companies they drove for and "quit", they will simply stop driving, and those jobs don't immediately get taken out of the jobs report.

If you have tens of thousands of people doing this, imagine how the jobs data becomes very skewed very quickly, and gives people a sense of a stronger labor market than what is reality.  

Most people think the Covid-19 Pandemic is years behind us, however, how people are living, how data is collected and reported is still a work in progress.

I will update my blogs as the economic and earnings data is released.

If you need a second opinion from your current investment allocations or are looking to work with a new financial professional, please contact me and I will be happy to setup a meeting for us to discuss your current situation.

Investing involves serious risks and past performance is no guarantee of future performance or success.  This is not an offer to buy or sell securities and nothing contained herein should be interpreted as a recommendation regarding any investment or investment strategy.  Before making any decision to invest, first read the relevant disclosures and important information provided to you.

Please take the proper risk for your current situation and get the advice from a financial professional who clearly understands your current & future goals and objectives.

Investments are NOT FDIC INSURED * MAY LOSE VALUE * NO BANK GUARANTEE