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Market Update – What To Do Now?
Dear Great Lakes Wealth Clients and Friends,
I trust all is well and that you and your family are hanging in there as best you can! With the continued stock market volatility and uncertainty, I want to provide you with our updated market thoughts:
- Our Core-Diversified Portfolio is built for times just like this. It has a primary objective of providing positive returns in ANY market environment. It will typically carry only 20-30% of the market’s downside and +80-120% of the market’s upside. This all equates to a targeted +5-8% annual return in “normal” times. It will traditionally do even better right AFTER extremely stressful periods. The S&P is -32% YTD, and our Core-Diversified Portfolio is approx. only -9% YTD! We believe that from here, it may very well now return over +10% for the balance of 2020.
- Bill Miller was interviewed on CNBC yesterday and called this market “one of the best buying opportunities of his lifetime!” (The others were 1973-74, 1982, 1987, and 2008-09).
- Additionally, I was recently interviewed by Channel 7 News WXYZ discussing what investors should consider doing right now.
- Given the understandable nervousness of investors, here is our current MARKET UPDATE (Thru 3.18.20). We believe the stage is still set for significant returns longer-term! However:
a. With the market’s volatility over the past two months, we had reduced risk in the short-term (raised cash), but are still extremely bullish for intermediate to long-term investors.
b. This week, we have begun to slowly increase our exposure to the equity markets.
c. The Fed lowered interest rates last Sunday night by 1% to a 0%-.25% target rate and has initiated very aggressive stimulus measures as well.
d. This is setting up to be a GENERATIONAL BUYING OPPORTUNITY!!!!! We evaluate downside risk to no more than -5-10% from here, which would be similar to the S&P loss in 2008.
e. Market volatility remains exceptionally elevated as fears around the spreading of the coronavirus and global oil price shocks have become even more of a reality.
f. Stock prices are now in Bear Market territory, as investors attempt to measure the economic impact of the COVID-19 virus and oil shocks to the system. During periods of volatility, it’s important to remember that stock market corrections are not unusual and represent a normal part of the investing cycle, and they can actually create significant buying opportunities for mis-priced assets. Therefore, as you probably know, we believe that “Bear markets create an extreme opportunity to invest! But… we need to be thoughtful, disciplined, and patient.”
The Bottom Line – From Great Lakes Wealth: (3.18.2020)
- 2020 – SHORT-TERM: We have seen our near-term indicators move into heavily oversold territory over the past few weeks. We believe that a significant “Buy Bounce” should be imminent.
- 2020 – LONG-TERM: With the current violent drop in the markets, we think many opportunities now exist on a Price/Risk/Reward basis. We do think the markets will rebound significantly longer-term. We also think there will be continued volatility. Now may be a great time to add to or rebalance your accounts? We currently have a “Buy” on all 12 of our investment strategies.
- Until we get Q1 earnings reported (primarily during April 2020) we recommend primarily investing in “sectors” (using ETFs/Mutual Funds) for the time being - Our US Growth Portfolio or in the broad-based S&P 500 thru our Rising Dividends Portfolio. This is until we see the earnings reports and the Q2-Q4 forecasts from the companies we follow. The violent drop-off in the US economy recently makes it extremely hard (and somewhat just “guesswork”) in determining which are the best stocks to own going forward. So, by picking only the “sectors,” there is less risk than just picking a “stock” within the sector. And investing in the broad market reduces your risk, too.
- Our approach in 2020 – Know what you own… and why you own it! A safe alternative is to try and make, “+5-8%, while you wait,” inside of our Core-Diversified Portfolio. With the current drop, this portfolio may now deliver 10%+ returns in 2020, to new investors.
- BEST IDEAS - Compelling opportunities exist in Technology, Financials, Utilities, Real Estate, Metals & Mining (Hard Assets), Industrials, Healthcare, and select Oil/Energy investments.
- We will continue to stay active, diligent, and disciplined while managing all of our investment strategies. Stay Patient and Don’t Panic!
- Please read our March Market Outlook Newsletter for additional information.
Our Current Sector View
Healthcare – BUY
Comm Services – BUY
Info Tech – BUY
Industrials – BUY
Financials – BUY
Real Estate – BUY
Utilities – BUY
Gold & Silver Miners – BUY
Strategically Strong. Your investment strategy has been created to reflect your time horizon, risk tolerance, and goals. As an investor, getting through a bear market means having the poise to ride out, and even take advantage of, short-term volatility. We'll be paying close attention to market developments in the coming days and weeks, and we look forward to discussing your specific situation with you on our next scheduled call.
If you're not yet a client, but are interested in becoming one to take advantage of this current major opportunity, please give us a call at 248.378.1200 or send me an email at firstname.lastname@example.org.
Stay safe & stay well!
Dewey D. Steffen
CEO / Chief Investment Officer