There are various indicators that we (and most other portfolio managers) keep at least one eye on all the time. Trying to keep up with the flood of information is like drinking from the proverbial fire hose, so it’s good to have the distillation that is provided by our chosen indicators. General Eisenhower famously pointed out the importance of not letting the important get run over by the urgent. Our secret sauce of selected indicators helps us follow Ike’s dictum.

We observe the path of the major indexes first: the Dow Jones Index*, the S&P 500 Index*, and the Nasdaq Index*. We can see that all of these main indicators experienced the huge drop in March and all have been clawing their way back. We can also note that the index that appears to be the strongest continues to be the Nasdaq, thus our primary stock holdings should be oriented toward that index.

Another area we pay attention to is the strength of the US Dollar. When any country’s currency is gaining vs. other country’s currencies, generally that country’s markets will be strong, along with its currency. A chart of the US Dollar shows that it is in a long-term uptrend, (good for US Stocks) but it has been losing ground recently vs. other areas such as Europe and Asia. This alerts us to pay attention to foreign stocks to see whether the US markets continue to be the stronger place to hold stocks.

We like to keep an eye on the value of Gold. In times of stress (Have we had a lot of stress on markets this year!) gold values tend to move up. It is typical that when stock markets are strong gold is weak and vice-versa. Interestingly, that is NOT the case today: both stocks and gold are rising. We hold both but watch the values closely, as it is likely that one or the other will not continue its upward trajectory.

And that takes us to company earnings. Four times each year US stocks present their earnings records to the public, and it is common that major indexes react to earnings reports — either positively or negatively. Today July 30th is a somewhat unusual day as the stocks that make up over 40% of the value of US markets will be reporting their earnings AFTER the markets close today. By the time you read this we will have seen (in particular) how the earnings look for many of the most widely-held tech stocks. In anticipation of these reports some people will see the glass as potentially more empty and sell those stocks and others will see it as more potentially full and buy the stocks. The result will usually be some (often volatile) moves in the following few days’ market values.

While there are many other indicators, these are near the top, and following them often gives us clues on which ways markets will be moving in the near-term.

Ron’s Market Minute — The Fed Meets and Big Tech Companies Get Flogged!

The Fed meeting announcement, following their 2-day meeting, was one of the more boring in recent history. That was probably by design.

The report basically said that we are still in a recovery stage following the massive drop earlier this year as a result of a self-imposed shutdown of the country’s businesses. Boring! And there appeared to be no effect on markets.

However, we also had the first House Judiciary’s Subcommittee on Antitrust, Commercial and Administrative law in MANY years. This was a hearing about competition and freedom of press as the committee met with (by video) four heads of some of the world’s largest tech companies.  Are these companies stifling competition or restricting news? A lot of people think so. This is a serious issue for reasons beyond the obvious. Why is this important to you or me?

The stocks of just a handful of companies make up over 20% of the value of the Nasdaq index- the one that is having a good year despite the virus, as the tech stocks in many cases are gaining strength and popularity as people stay home and work. 

The general investing public doubts (I believe) that lawmakers are seriously going to challenge companies that are so popular with consumers today, and a change of a few points in tax is less important than if Amazon or Google faces new, tight rules on how they rank products in search engines. Could Congress require that Facebook sell off Instagram? Yes. If Congress decides that common ownership of the two social platforms is anti-competitive, they could do just that. 

These things are unknowable at this point. But they may give us some particularly volatile action in the ONE strong index over the next few days or weeks.

And one last thing: It’s from Jeff Bezos, head of Amazon and now the world’s wealthiest man.

As he concluded his remarks before the subcommittee yesterday, he had this to say about his company and our nation. I don’t mind saying that I found it heartwarming to hear him speak about the promise of America. His words:

  ‘It’s not a coincidence that Amazon was born in this country. More than any other place on Earth, new companies can start, grow, and thrive here in the U.S. Our country embraces resourcefulness and self-reliance, and it embraces builders who start from scratch. We nurture entrepreneurs and start-ups with stable rule of law, the finest university system in the world, the freedom of democracy, and a deeply accepted culture of risk-taking. Of course, this great nation of ours is far from perfect. Even as we remember Congressman John Lewis and honor his legacy, we’re in the middle of a much-needed race reckoning. We also face the challenges of climate change and income inequality, and we’re stumbling through the crisis of a global pandemic. Still, the rest of the world would love even the tiniest sip of the elixir we have here in the U.S. Immigrants like my dad see what a treasure this country is—they have perspective and can often see it even more clearly than those of us who were lucky enough to be born here. It’s still Day One for this country, and even in the face of today’s humbling challenges, I have never been more optimistic about our future.’   

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[@]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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