The father of President John F. Kennedy famously noted “When I start getting stock tips from my shoe-shine boy, it is time to get out of the market.” The story goes that the Kennedy patriarch did just that in early Autumn of 1929, just prior to the most famous market crash of all time.

Having sold when he did, he was well positioned to buy up a lot of distress-priced assets of all types. Even today, traders hear the ghost of Joe Kennedy whenever the markets make new record highs…and then appear to stall. Like kids on a car trip, people start asking “Are we there yet?”

Of course, no one knows the answer and anyone who tells you they can successfully call a market top is either a fool or practicing witchcraft, or maybe both. Still, the conversations of traders are hinting that they are having a hard time NOT thinking about a market top. They have something of a case too. For instance, despite the impact of the Covid-19 pandemic, all three of the major US indexes have recently printed at new all-time highs. The appetite for risk is running high too; investors borrowed a record $722.1 billion on margin accounts (through November 2020). The Wall Street Journal reported that the new on-line trading platform Robinhood (which targets younger investors) saw 500,000 downloads of its trading app – in December alone. I hope there were not too many shoe-shine boys among the downloaders.

Now, realistically speaking, it would be unwise to discount the possibility of a market correction. A lot of professionals in the world of finance consider it a fairly strong likelihood and you can count us as members of that group. Experienced investors and money managers know that pullbacks, corrections and bouts of high volatility are normal, in fact common. It’s all part of the process.

So, we might be at or near a market top. Or maybe not. But I’d like to not dwell on the guesswork of trying to pencil in the date on my planner. What I want to focus on – and ask you to focus on too – is while the future is always fraught with unknowns, we do have rules and policies that tend to work very well. One of most important rules is to not lose sight of the idea that investing is a longer-term enterprise. (The term for short-term investing is gambling.)

We remain very optimistic that 2021 will be a strong year. We also expect some sort of correction to occur and we think that is more likely to come in the first half. Accordingly, this is a year where we will look more broadly at performance over the balance of the year and a bit less on the quarter-to-quarter stuff.

Ron’s Market Minute — When You’re up to your Shorts in Alligators…

You may have heard this phrase “When you’re up to your shorts in Alligators, it’s hard to remember that your objective was to drain the swamp.” The point is that when you’re in the middle of something, sometimes you don’t see the bigger picture. Later when you step back and look, in hindsight it becomes clearer. 

And in that vein, over the past year we’ve dealt with trade wars, political wars, a once in a lifetime pandemic etc., and it’s pretty easy to become distracted and lose sight of the bigger picture. I’d like you to focus on the bigger picture:

This is a picture of returns since the mid 1920’s of the ‘market’ as defined by the S&P500 Index.  History doesn’t repeat exactly, but it – according to Mark Twain — does seem to rhyme. Today (I believe) we’re in the middle of another strong secular bull market. The trade war and pandemic were pushed aside like the 1980’s thru 1990’s bull market advance ignored the 1987 market crash. Have a close look and you’ll see the red boxes indicating time periods when markets basically went nowhere, interspersed with ‘up’ markets in which stocks seemed to soar (shown by the blue arrows).  From the chart above, I believe that our current secular bull market may continue throughout this decade, perhaps further. That’s not a guarantee, of course, and regular readers know we don’t try to predict, but rather to discern what’s strong and what’s weak in markets, and then invest in the strong areas and avoid the weak. 

Currently we are in a strong bull market. Investors can choose to fight it (market’s too strong!) or join in. We choose to join in. 

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

LFS-3408638-011521

This weekly article reflects news, commentary, opinions, viewpoints, analyses and other information developed by Denk Strategic Wealth Partners for use with advisory clients only 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.

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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.

Ron Denk is a Registered Representative, offering investments through Lincoln Financial Securities Corporation, Member FINRA/SIPC.

Mr. Denk is also an Advisory Representative offering services through Denk Strategic Wealth Partners, a Registered Investment Advisor. Denk Strategic Wealth Partners is not affiliated with Lincoln Financial Securities Corporation.

Please see Denk Strategic Wealth Partners’ Client Relationship Summary here http://denkinvest.com/?page_id=7099 for succinct information about the relationships and services DSWP offers to retail investors, related fees and costs, specified conflicts of interest, standards of conduct, and disciplinary history, among other matters.

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Past performance is not a guarantee of future returns.