And, speaking of things bovine, the volatility seen in the markets in recent weeks has caused more than one seasoned professional to remark ‘Holy Cow!’ Some of us are old enough to remember wondering if / when the Dow might reach or break 1000. Well, those were the days. Never did we imagine that we would see weeks where it would have thousand-point swings.

The current bull market is undoubtedly enjoying a surprisingly long run. And, that fact alone has induced skepticism as to how long it can actually go. At every downturn a few more traders turn from optimism to pessimism. But, is it warranted?

Believing that a bull market will come to an end strictly based on its age is akin to believing that a tossed coin will be heads on the next toss just because the last five tosses produced tails. That’s known as the ‘gambler’s fallacy’. It is a fallacy because each toss of the coin faces even odds of heads or tails – history is irrelevant. So then, with respect to the markets, is history always irrelevant? No.

What can be regarded as instructional history can be found in what is called the business cycle.

Business cycles do have definable stages and the last one is called ‘the end’. Unfortunately, the end is not knowable in advance of its arrival. Clues however, can be found: consumer confidence erodes, hiring of workers falls off, business traffic slows, houses stop selling, interest rates may be rising high enough to make owning stocks less attractive. So, at some point investors are correct to ask, ‘Are we there yet?’ I don’t think so. Most if these indicators are still very bullish.

Much of the panic in recent days has not much to do with any economic fundamentals.

Facebook is in some serious hot water over their careless use of their user’s data. Their cavalier response to the crisis didn’t help much either. Alphabet (Google) took a big hit merely because they perhaps have some questions to answer on the same data privacy issue. (Don’t forget that last year Google paid an astronomically large fine to the EU — 2.3 Billion dollars — specifically for failure to protect user privacy.) Amazon also fell dramatically due to the specter of anti-trust questions.

All of these volatility issues together caused many observers to think that the buoyancy that has been enjoyed by the tech sector is now deflating. To some degree, we think that may be true. But, it has not much to actually do with tech. None of those companies are truly technology companies. Facebook is a social club. Google is predominantly an internet search utility. But both have evolved into being media companies. They’re in the advertising business. And trying to re-invent the ad business, while running it, has its challenges. They’re driving a train while they’re laying the tracks. Irrespective of motive or questions of honesty, mistakes will be made.

None of this has anything to do with an aging bull.

Admittedly we are seeing a bit of a slowdown in sales of personal real estate but the culprit there is more a lack of supply of homes to buy and not a lack of demand. Consumer confidence is holding at some very strong numbers and that is not likely to erode as long as we are seeing headlines saying things like ‘The number of Americans filing for unemployment benefits fell to more than a 45-year low last week’.

As we like to occasionally remind people, the markets are not the economy and the economy is not the markets. You might even say that the markets are, at times, too easily distracted. Predictably though, they will return to the fundamentals and the fundamentals are always based on the underlying economy. And for the moment, that’s reassuring.

Market Minute 3/29/2018 – Volatility

Volatility – sometimes volatility is just volatility. The only indicator that bothers me at this time is the VIX – it’s still at an elevated level, and although I am still quite bullish on 2018, I could be MUCH MORE optimistic in the shorter term if the VIX would stay below…say 17. It’s at 20.5 at the moment indicating some lingering fear in the marketplace. That said, technical indicators appear to indicate possible bottoming of the indexes, which is bullish. And the New York bullish percents are almost (!) at a point where things have historically bounced…up.  So, we’ll wait and watch for more clues to the near-term markets. In the meantime, here’s a bit of Easter pontification.

  • All I Need to Know About Life I Learned from the Easter Bunny
  • Don’t put all of your eggs in one basket.
  • Walk softly and carry a big carrot.
  • Everyone needs a friend who is all ears.
  • There’s no such thing as too much candy.
  • All work and no play can make you a basket case.
  • A cute little tail attracts a lot of attention.
  • Everyone is entitled to a bad hare day.
  • Let happy thoughts multiply like rabbits.
  • Some body parts should be floppy.
  • Keep your paws off other people’s jellybeans.
  • The grass is always greener in someone else’s basket.
  • An Easter bonnet can tame even the wildest hare.
  • To show your true colors you have to come out of your shell.
  • The best things in life are still sweet and gooey!

 Enjoy the Holiday break!


 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.

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