Markets have rallied to start the year with tax-loss selling having run its course and a lot of value being found by stock screening programs. You see, if the market price has come down but the projected earnings have not yet been updated, a given stock will appear relatively cheaper than it used to. But this is fool’s gold if it turns out that the earnings are later revised lower on a forward basis.
I thought I was going to be able to open this post with a line about “what a difference a year makes”, instead, I think it should be “what a difference a couple of weeks makes…”
Last week we discussed the tax benefits of evaluating your investment portfolio before 12/31 rolls around. This week we’ll have a look at another critically important topic, your Estate Plan.
1931 was the last time stocks had this bad of a start to December - and that doesn’t include yesterday’s drop of around 1.5% which came after being up as much as 1%, early in the day. For anyone who thought that the Federal Reserve Chairman, Jerome Powell was going to come the rescue of falling markets and deliver a Santa Claus Rally, they were mistaken.
Most of us hate taking losses. In fact, studies show people dislike taking losses twice as much as they enjoy taking gains. However, refusing to take losses and holding onto losing positions can be disastrous to your financial health.
Our portfolios are weathering the storm as well as could be expected due to having set aside cash across the board in September and adding to it throughout October and November. We have been getting increasingly cautious all year long – which has served our clients well.
After being down nearly 2% today with all 11 sectors being negative, the S&P 500 has now joined the rest of the world in the red for the year 2018. On top of that, bonds are also down – and so is gold, real estate and even Bitcoin. There is nowhere to hide.