Last year was a great year for many investors. We are especially pleased that the Denk Strategic Wealth Partners family of clients was among those enjoying good returns. We are also pretty pleased that, at least thus far, 2018 could well be a continuation. We continue to see a lot of strength both inside and outside of the U.S. prompting us to believe that this will likely be a year to own stocks.

As we look at national statistics, we see that there is still a ton of money (that’s a technical term) sitting on the sidelines and not participating in investment opportunities. We’re talking about the cash that’s hiding out in savings accounts and checking accounts — and earning basically squat (another technical term).

Some of these cash owners say they are waiting for markets to be less volatile, some say they feel they have missed the returns and are now waiting for markets to pull back. Whatever the reason, it is beginning to look like people have crossed over – from fear of being IN the market, to FOMO (fear of missing out) or more specifically…fear of being OUT of the market.

One of the great investors of our time, Sir John Templeton, said that bull markets are ‘born on pessimism, grow on skepticism, mature on optimism and die on euphoria’. We are now nearly nine years into the current bull market and there is no doubt in my mind that there’s plenty of optimism out there in investment land – both here and around the world. But, we are not seeing euphoria. Once we reach the euphoria stage people will no longer be talking about high P/E ratios, too many new highs, too little volatility, and so on. At that stage it will only be obvious that markets are going up, and they are not participating.

Stocks haven’t seen the big returns that are normally associated with late-term bull markets.  Headlines may make some people think they have, but even the 21 percent returns in some markets last year are not really that big. In fact they are just average for a good bull market.

So, while we are seeing optimism, we are doing so with two feet on the ground. For a taste of euphoria, have a look at some of the recent news about bitcoin. That’s just a small taste of what euphoria can look like.

We suggest that you watch the headlines in some of the common ‘financial’ websites. There you will find no shortage of skepticism. Last week gave us ‘Reasons why we’ll see a DOW 30,000’ followed by ‘Take your profits now and get out of the market’. And how about yesterday’s ‘The most sustainable stock market bubble ever’. Does that mean it’s a bubble, or it’s a sustainable market? Yesterday also had ‘How long can the bull market run?’ Makes us wonder about the priorities of some of these publishers. It becomes hard to think that they are as interested in journalism as they are in clickbait.

Nevertheless, these headlines are good news in my book. The day you open one of those sites and see headlines that read more like ‘Everything’s going up, and you’re missing it’, you’ll know that it’s time to be on the lookout for euphoria, and that perhaps we’re nearing the tops in markets. But keep your expectations in check. By their very definition, volatility and unexpected swings cannot be forecast. Expect to see more volatility in 2018 than last year – 2017 was unusually tame. Keep your cool in the event of sudden jumps and drops. Most of them end as quickly as they arrive. Indeed, it’s the price that we pay for superior longer–term returns.

(Ideas from Ken Fisher’s monthly comments, used with permission.)

Market Minute 1/19/2018 – Shutdown- a Good Idea!?

Yes, there’s a lot of headline space given to a potential ‘government showdown/slowdown/shutdown’ in the past couple of days. I think we’ve seen this movie before – and are pretty confident that we know the ending. It looks like this: the government may or may not shut down certain offices and services, the world knows that the US will continue to pay its bills, the essential services and government benefits will continue to be paid, government employees may get a few days of paid vacation, and then all will go back to the way it was. I wonder if the IRS will close?  Not likely!

Most likely the key topics of discussion will not be settled today, shutdown or not.  DACA and border security are items that will still need a better resolution.

So in the event that we reach a time shortly before today’s market close, in the event that markets pull back because of the potential shutdown, we’d suggest that you be prepared to act- a pullback in a roaring bull market is almost always a buying opportunity to purchase stocks at a bit of a price-reduction.

And by the way, in the event we do NOT see a government shutdown, be prepared to act anyway. Unemployment numbers are very good, corporate earnings look healthy, and effects of the new tax cuts are already being positively felt.

As we’ve said before, it looks like a good year to own stocks.

 

Ronald P. Denk, CFP®
Investment Advisor
Denk Strategic Wealth Partners
10000 N. 31st Avenue, Suite C-262
Phoenix, AZ 85051

Phone (602) 252-8700
Fax (602) 252-8701
Toll-Free (877) The-Denk

www.denkinvest.com

This weekly article reflects news, commentary, opinions, viewpoints, analyses and other information developed by Denk Strategic Wealth Partners and/or select but unaffiliated third parties. DSWP provides Market Information for illustrative and informational purposes only. If you wish to receive this weekly commentary by email please contact us at 602-252-8700 or by e-mail at lindaw(at)denkinvest.com. If you are receiving this commentary via email and would prefer not to please let us know either by email or phone.

Ronald Denk is an Advisory Representative offering services through Denk Strategic Wealth Partners, A Registered Investment Advisor. He is also a Registered Representative, offering investments through Lincoln Financial Securities Corporation, Member FINRA/SIPC.

Denk Strategic Wealth Partners is not affiliated with Lincoln Financial Securities Corporation. Information in this commentary is the sole opinion of Denk Strategic Wealth Partners. Past performance is no guarantee of future returns. All market related investments involve various types of risk, which include but are not restricted to, credit risk, interest rate risk, volatility, going concern risk, and market risk.

The Update provides information of a general nature regarding legislative or other developments. None of the information contained herein is intended as legal advice or opinions relative to specific matters, facts, situations or issues. Additional facts, information or future developments may affect the subjects addressed in this document. You should consult with an attorney, accountant or DSWP planner about your particular circumstances before acting on any of this information because it may not be applicable to your situation.

Lincoln Financial Securities and Denk Strategic Wealth Partners and their representatives do not offer tax advice. Please see your tax professional regarding your individual needs.

*The indices are representative of domestic markets and include the average performance of groups of widely held common stocks. Individuals cannot invest directly in any index and unlike investments, indices do not incur management fees, charges, or expenses, therefore specific index returns will be higher. Past performance is not indicative of future results.

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