Goldilocks Redux? “Not too hot but not too cold either”
FourStar Wealth Commentary for the Fourth Quarter 2015
We characterize this economy as not too hot, not too cold. Some readers might remember the concept of the Goldilocks Economy from the mid 2000’s as many spoke of the economy in these terms. It feels that way again. The U.S. continues in a positive way with the consumer doing better, the housing market heating up, and the market for luxury goods growing. The GDP numbers for the economy have been revised higher for second quarter. Housing is growing and is officially out of the 2005-2012 crash period. So fundamentals for our economy show no recession in sight.
Canada however is in recession due to commodity prices declining and their economy is heavily dependent on commodity prices. As a result their currency, the Canadian dollar is waning at 70-75 cents to the US dollar.
China is in a major credit bubble unwind, and we expect more problems there. We had spoken about this before. Most China watchers had not believed most of the growth we were hearing about in China. It now appears that much of the growth that was reported was leverage induced and that bubble is now unwinding quite sloppily.
No one is talking about Greece. Greece was a major story until other stories crowded it out, not large enough to move the needle.
It’s a good time to travel! The US currency is strong, others are weak…….book your trips now!
Our US markets are down 10% from the highs and down 9% for the third quarter. S and P 500 is off single digits YTD as of the end of September. September is usually the worst month, if one follows history, and that was true again for 2015. October however gets the headlines as there have been more spectacular crashes in October, 1929, 1987, 2008, etc. This usually means the decline is nearing a late stage. We certainly hope there will be no crash in October!
Many cite parallels to the market crash of 1929, namely with increases in personal debt, margin debt and speculation in China which was also present in the 1920’s. Meanwhile the financing markets and mergers in 2015 have hit record levels.
OUR POSTURE ========
We have been cautious since May 2015 when the markets topped out. We run a number of models that raise cash, to protect value and reduce volatility. Right now, all the models we run that do raise cash have done so. Those models are completely on high alert. This is not a predictive move, rather reactive. If the markets decline from here, those portfolios will do better in the short run since they have lots of cash.
Those that are fully invested long term are choosing to stay the course. Time will tell how these markets play out, but that is where we stand today.
Lastly, congrats to Arrow Shares, listing a new fund on NYSE. As many know we were invited to assist in ringing the opening bell at the New York Stock Exchange on September 15th, a video is available on our website!
Please call us with any questions, comments, compliments or concerns!
CEO and Chief Investment Officer
FourStar Wealth Advisors, LLC