Join me, if you will, on a brief walk down Memory Lane. It won’t take long — we’re only going back to February when, over the course of a few days, our major indexes had run for cover and entered what is lovingly called a ‘correction’.

The source of the spookiness was the dreaded specter of inflation. The monster that had been dormant for many moons had appeared and was given credence by our then ‘fresh off the boat’ new Fed Chair. He had not yet learned the viciousness of the financial writers in the media — and because of this he had not chosen his words as well as he perhaps could have. Over the coming weeks his remarks infected market volatility like a virus. It was codified in the CBOE Volatility Index — the ‘VIX’.

Regular readers of this newsletter know that we like to watch this VIX thing and they also know why we watch it. If you are not one of those people and are curious, here’s the scoop: the VIX tracks S&P 500* option bets, which are being made to calculate expectations for volatility over the coming 30 days. A higher number = an elevated nervousness of uncertainty — which tends to cause selling of equities, pushing prices down. Conversely, a dropping VIX shows that reticence abating — which then (normally) brings buyers back to participating in equities. And that — you guessed it — puts positive pressure on stocks. So, the thing to know is: Rising VIX is a negative for equities and a falling VIX is (generally) a good thing. Here’s an even better thing: On Wednesday, the VIX closed below its 200-day moving average for the first time since Jan. 12.

So is all good now? Is it ‘Everybody back in the pool’ time?

Maybe…

It bears repeating…that we remain essentially bullish.

The positive forces that we see, both in the present and for the foreseeable future, easily outweigh the negative ones. Most of the critical indicators are still moving in the right direction. As was observed at Stockcharts.com: “Eight of nine sectors advanced on Wednesday as well, providing the wide participation that we want to see on rallies.  Energy (XLE, +2.04%) was the clear leader as surging crude oil prices ($WTIC, +3.01%) bolstered this sector.  Financials (XLF, +1.48%), materials (XLB, +1.44%), technology (XLK, +1.24%) and consumer discretionary (XLY, +1.08%) all finished higher by more than 1%.  That’s solid action.”**

Admittedly, we have had our concerns. We have great affection for our Bull but, truth be told, there have been a few times when we have seen him staying out too late, stumbling under the streetlamp and spending time with unsavory characters. Hopefully, this week he’s spending some time in re-hab.

** (This is not a recommendation to buy these, or any, particular securities.)

Market Minute 5/11/2018 – A Few More Reasons to Look at the Bright Side

I confess. I am an optimist. (Although I tend to think of myself as a realist.)

With markets looking rather cheery this week, I decided to reach further and look at more positive areas of our world today.

You don’t have to look too far to find negative articles and headlines these days.  Just watch the news, go on social media, or have conversations with friends and co-workers. My guess is that you’ll hear about political instability, natural disasters, and an endless list of bad news.  In fact, it seems that every year people label the current year the worst in history. They have obviously never read a history book.

In reality, this is the greatest time in history to be alive. Our world has seen an unbelievable amount of progress over almost any time period you look at. While it’s true that bad news makes for a better story, have a look at a few stats I pulled from a current book.  

The Rise and Fall of American Growth by Robert Gordon 

  1. Over the last 20 years, the proportion of people living in extreme poverty has almost been cut in half. 
  1. Just 200 years ago, 85% of the world population lived in extreme poverty. 20 years ago it was 29%. Today only 9% live in extreme poverty while the majority of people (75%) around the globe live in middle-income countries. 
  1. In 1800, among all babies who were ever born, roughly half died during their childhood. Life expectancy was just 30 years and no country had a life expectancy above 40. Life expectancy at birth was only 45 years in 1870. The average life expectancy around the world today is 72. 
  1. The violent crime rate has been on a downward trend since 1990 in the U.S. Just under 14.5 million crimes were reported in 1990. By 2016 that figure was well under 9.5 million. 
  1. The number of deaths from natural disasters is 25% of what it was 100 years ago. 
  1. Flying has gotten 2,100 times safer over the past 70 years. 2016 was the second safest year in aviation history. The odds of being fatally injured in a plane crash are just 0.000025%. 
  1. The share of homes that had electricity in 1870 was exactly zero. Today the proportion of people with electricity is 85%. 
  1. In 1905, a Vermont doctor and his chauffeur were the first to successfully drive a car across country from San Francisco to New York. It took them 63 days. Today you can fly cross country in a matter of hours while using wireless Internet. 
  1. Close to 20% of males born in the U.S. died before their first birthday in the year 1900. Today the mortality rate doesn’t reach that high until you get to age 62. 
  1. More than 37% of deaths in 1900 were caused by infectious diseases. That number dropped to less than 5% by 1955 and just 2% by 2009. 
  1. Retirement is still a relatively new concept. In the past, most people simply worked until they died. In the year 1870, for those who lived past age 65, the labor force participation ratio for males was close to 90%. Today it’s less than 20%.


Human ingenuity and innovation have created massive progress around the globe. There is still a lot of work to be done and the world is certainly far from perfect.

But sometimes it’s good to have a reminder that progress is there even when it doesn’t feel like it.

 

Enjoy your weekend.  

 

 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.

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*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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