This Week in the Market
With Scott McCaghren and Tony LaPorta
Due to technical difficulties involving the audio portion, this week’s commentary will be written and brief.
There is very little that has changed our viewpoints surrounding the entire marketplace. It is experiencing hypersensitivity to the onslaught of news releases. As mentioned before, some prove to be real while others prove to be false. Trade talks are the number one catalyst for the unprecedented trading ranges that are currently being endured. Interest rate adjustments are the number two catalyst for the same. What makes this extremely complex is the correlation between these two ongoing discussions.
Another layer of complexity involves the “good news is bad news” mentality that our domestic markets seem to be struggling with the most. In other words, trade talks with China breaking down means lower immediate stock prices but higher probability of interest rate cuts; which, in turn means higher equity prices. Trade talks progressing means higher immediate stock prices but lower probability of interest rate cuts; which, in turn means lower equity prices. Positive U.S. economic data, used to mean higher U.S. stock prices; however, now positive data means lower probability of rate cuts which leads to lower equity prices.
The main point here is that having a volatility hedge implemented inside of the portfolios is beyond import, it is in fact crucial. Volatility is likely going to be the new normal and that can be very uncomfortable for investors experiencing the retirement phase of life. This is what we specialize in, therefore, this is why our portfolios are specifically designed to adapt to the ultra-dynamic investment scene that currently exists.
It would be extremely ill-advised to desire 100% participation of the current domestic/international markets as well as the domestic/international credit markets. If there was EVER a time to have portfolio protection in place, it would be now (and yes that includes ’08). We are certainly not suggesting that we will re-visit those times, but you have to remember that volatility during those years was not near as severe as it is now. If volatility is the new norm, a volatility hedge makes more than perfect sense.
As always, we continue to monitor all equity, treasury, currency and commodity conditions in order to efficiently deploy capital as well as protect invested assets.
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