Stanton Group Update Friday, February 28, 2020
By John Stanton
This past week, the DJIA is on track to drop nearly 4,000 points, landing all the major indexes in the 10%+ correction area.
I have been concerned about the rising risks in this late stage bull market, for the following reasons:
Extreme overvaluation, that is above the 97th percentile.
Narrowing leadership, and speculation that has become concentrated in expensive mega-cap stocks.
The Feds moral hazard, (easy money policy) , which too many investors, believe will prevent any chance of a bear market, or recession.
These are the reasons our practice has had in place a defensive cash reserve in our model stock allocation. Not entirely out of the market, but a hedge against events like this week, and the concerns about overvaluation, with a possible business slowdown. Remember, in a rising market, when you buy an index fund, or individual stocks, there are willing sellers on the other side who are locking in their gains at a high price.
I have found the best returns tend to be when the willing sellers are panicking, and want to get out at any price, along with a turn in the business cycle.
Also of note is my growing concern about how narrow the exit might become, if/when everyone decides to sell stocks at the same time. Which is exactly what Wall Street has experienced this past week.
Over the past week, declining stocks outnumbered advancing stocks by more than an 8 to 1 margin.
At this point, I am identifying this as a probable correction. From an economic standpoint, there has been slowing growth worldwide, even before the news of the coronavirus broke.
Even with the selloff, valuations are still elevated, relative to the individual company fundamentals.
Stocks, and the stock market, are just one alternative for your investment dollars. Every alternative, from bonds, CDs, real estate, private business investment, has its own set of potential return outcomes, along with its unique set of risks.
Developing a plan for your wealth, and assessing the various investment alternatives, is what our practice does.
If you have questions about your current plan, or portfolio, The Stanton Group is here to help. Schedule a call online today, https://calendly.com/jstanton-1/call30 or email me directly at Jstanton@seacrestwm.com.
I will be providing additional updates if additional changes are occur to our strategy.
Personal Note
Like everyone else, I have been observing the news of the coronavirus outbreak, with great interest.
I find it extremely frustrating that most of the sources have not been interviewing true experts in infectious disease. Or maybe I just have not caught the interviews with those experts.
A virologist is a microbiologist who studies microorganisms that quickly duplicate, resulting in rapid spreading of viruses.
I came across this recent interview with Kurt Williamson, a Virologist, and Associate Professor in the William and Mary Biology department. In the interview, Mr. Williamson does a good job, in my humble opinion, of laying out what the coronavirus is, how it differs from other known contagions, and the concerns he has .
His ending point regarding his advice for the general public is “I don't think there's cause for panic, but it should be taken very seriously. The best things anyone can do to stem a communicable disease is wash your hands frequently with soap and warm water. Cough and sneeze into your elbow, not into your hands. Avoid touching your face (eyes, mouth, and nose) as much as possible.”
His full interview can be found here: https://www.wm.edu/news/stories/2020/a-coronavirus-qa-with-a-virologist.php
Similar to what my Doctor told me earlier in the month, when I had the flu, in addition to stay at home, if possible, and contact his office if my symptoms last longer than 10 days.
Stay healthy everyone, look forward to speaking with you soon.
John Stanton is the Wealth Advisor at The Stanton Group WP | Seacrest Wealth Management, LLC. With more than three decades of experience in the financial services industry, he serves as an advisor for clients, focusing on financial planning and the investment strategies to support their financial plan. Based in Naperville, Illinois, John serves clients in Naperville, Plainfield, Darien, and throughout the state. Learn more about John’s services by visiting www.stantongwp.com or connecting with him on LinkedIn. You may reach John Stanton at 630-445-2380 or email JStanton@seacrestwm.com.
The Stanton Group WP provides investment advisory services through SeaCrest Wealth Management, LLC (the “SWM”), a registered investment advisor. SWM is a registered investment advisor (“RIA”) with the U.S. Securities and Exchange Commission located in the State of New York. SeaCrest Wealth Management, LLC can be reached at (914) 502-1900.
Certain assumptions may have been made in the preparation of this material as at this date, and are subject to change without notice. This is not an investment recommendation or a solicitation to become an investor in a pooled fund and/or a separate account managed by the Firm. Unless indicated, these views are the author's and may differ from those of the firm or others in the firm. We do not represent this is accurate or complete and we may not update this. Past performance is not indicative of future returns.
