November Market Update
We just finished our midterm election, which always has an impact on the market.
Let’s just kind of do like a overall big picture market update.
The third quarter earnings report showed that overall earnings are still holding up, although still blustered by certain sectors. This is why it’s important to not just sector diversification, but the agility to move between sectors.
For example, tech stocks are probably taking the biggest hit this year and we see that with earnings as they’re pulling back. However, most growth portfolios hold a lot of tech stocks.
Our growth strategies, however, have agility which means our portfolio managers can adjust and now have more industrial and energy exposure in their growth portfolios, not just the tech stocks.
If you have a portfolio made up of all pooled strategies, mutual funds, and ETFs, they can’t really be that agile like that. If you have a growth ETF, its prospectus determines what they must hold, no matter how good the manager is, he can’t deviate from that.
We were recently doing a portfolio review with a new client. They had a pooled strategy that is hard to tell by just looking at it what the sector exposure was, so in doing the review, we found that the sectors doing the best this year were the sectors they had the least of and the those that had the most issues, were the ones they had the most of.
That shows me that there’s not a lot of agility, no one is watching what’s happening. The pie chart was put together and then left to stay that way.
It’s really important to have diversity among the sectors, but it is also important to have agility to be able to move to the strength and away from the weakness.
If you’re not sure even how you’re positioned, just let us know and we will do a review for you to show how you are positioned, what exposure you have and your overall risk
In the last month, we had another rate hike and there is another one scheduled to come in December.
The markets have already priced these rate hikes as they have been announced earlier this year which means we haven’t saw as much of an impact when they happen, however, if December is a lot higher, or a lot lower than the 75 basis points they said, then you could see more movement in the market.
The topic that you’re not supposed to talk about – politics.
So, this is not a political talk, but the midterms do play an effect on the market.
Historic data shows a Republican led house has been one of the best performing times for the market.
Interestingly enough, after most midterm elections, there is a positive next 12-month period in the market.
When we look at the midterm elections results, well it is hard to see the real results with counting still going on in some states and the way it’s being reported.
For example, you see articles that there is no red wave, however, Trump endorsed 219 candidates, and 93% of them have won. So, there is some switch of power to the Republican Party that we’re seeing which historically is good for the stock market, regardless of what side of the fence you are on politically.
Silver Linings – Valuations and Tax Planning
This market has created some opportunities where the valuations are coming in and we are seeing companies that were selling at a premium before are now selling at a discount.
This means opportunity for portfolio managers because they’re able to buy companies at a discount. Again, an opportunity for portfolio managers who can be agile, not so much for those in pooled strategies such as mutual funds.
This is an even greater opportunity when you have money in a nonqualified account, not an IRA or ROTH, because you can do a lot of tax planning right now in the form of tax swaps or tax harvesting. This is when you sell some things that are down that at a loss that you can offset, gains or future gains from other positions while buying strong companies that are now selling at a discount.
If you’re not sure if that is happening in your portfolio, give us a call. This is the time of year we want to be making sure we’re reviewing and taking advantage of any tax swaps or tax harvesting that can be done making sure you’re positioned right for the coming year, especially if that historical trend of the market doing well after a midterm continues. You want to be able to be positioned in the right way to take advantage of it.
So if you have any questions and want to review how your portfolio is structured, then let’s talk!
We serve clients in Mineral Point WI, Dodgeville WI, Platteville WI, Lancaster WI, Fennimore WI, Boscobel WI, Richland Center WI, Muscoda WI, Spring Green WI, Mazomanie WI, Sauk City WI, Middleton WI, Madison WI, Fitchburg WI, Verona WI, Mount Horeb WI, Barneveld WI, New Glarus WI, Monroe WI, Belleville WI, Oregon WI, Stoughton WI, Darlington WI, Cuba City WI, Hazel Green WI, Belmont WI, Dubuque IA, Freeport IL
Want to share this blog post? Click the links below!